THE EMPLOYEES STATE

INSURANCE ACT 1948

ESI Scheme
ESI Scheme for India is an integrated
social security scheme tailored to provide
Social Protection to workers and their
dependents, in the organised sector, in
contingencies, such as Sickness,
Maternity and Death or Disablement due
to an employment injury or Occupational
hazard

History

In March 1923 before Indian independence B. N. Adarkar economist and

later Governor of the Reserve Bank of India, was appointed by the
Government of India to create a health insurance scheme for industrial
workers.
A year later the report he submitted became the basis for the Employment
State Insurance (ESI) Act of 1948.
The ESI Act was enacted in India in 1948, but come into reality from 25
February 1952, established in Kanpur and Delhi.
Initially intended for workers working in factories and companies only. It is
now applicable to all establishments having 10 or more workers including
educational institutions, hospitals, etc.,

Background

PIONEERING MEASURE IN SOCIAL INSURANCE IN INDIA.

HEALTH INSURANCE FIRST DISCUSSED IN 1927 BY INDIAN

LEGISLATURE.

ORIGINALLY CALLED WORKMENS STATE INSURANCE BILL

1946.

CAME INTO FORCE ON 19TH APRIL 1948.

PROVIDES FOR CASH BENEFITS AND MEDICAL FACILITIES TO

EMPLOYEES IN SICKNESS, MATERNITY AND EMPLOYMENT
INJURY.

APPLICABILITY
ACT APPLIES TO FACTORIES WITH 10 PEOPLE
USING POWER AND EMPLOYING 20 OR MORE
PERSONS WITHOUT USE OF POWER.
SHOPS
HOTELS AND RESTAURANTS
CINEMAS INCLUDING PREVIEW THEATERS
NEWSPAPER ESTABLISHMENTS
ROAD MOTOR TRANSPORT UNDERTAKINGS
EMPLOYING 20 OR MORE PERSONS
STATE GOVT MAY COVER OTHER ESTABLISHMENTS
IN CONSULTATION WITH THE ESI CORPORATION
AND WITH APPROVAL OF THE CENTRAL GOVT.

Present status

Coverage(As on 31st March, 2011)

No. of Insured Person family units - 1.
No. of Employees - 1.63 Crores
Total No. of Beneficiaries - 6.63 Crores
No. of Insured women - 0.24 Crores
No. of Employers, etc - 5.80 Lacs

DEFINITIONS
EMPLOYEE: EMPLOYEE REFERS TO ANY PERSON
EMPLOYED ON WAGES IN CONNECTION WITH THE WORK
OF A FACTORY OR ESTABLISHMENT TO WHICH THIS ACT
APPLIES.
INCLUDES TECHNICAL, MANUAL, CLERICAL AND
SUPERVISORY FUNCTIONS
PERSONS WITH REMUNERATION UPTO RS.15000 ARE
COVERED UNDER THE ACT.
NO DISTINCTION BETWEEN CASUAL AND TEMPORARY
EMPLOYEES OR TECHNICAL AND NON-TECHNICAL, OR
TIME-RATE OR PIECE-RATE
DOES NOT INCLUDE NAVAL, MILITARY OR AIR FORCE
PERSONNEL OR AN APPRENTICE AS PAER APPRENTICE
ACT

Contd..
Wages means all remuneration paid or payable in cash
to an employee, if the terms of the contract of
employment, express or implied, were fulfilled and
includes any payment to an employee in respect of any
period of authorised leave, lock out, strike which is not
illegal or layoff and other additional remuneration, if any,
paid at intervals not exceeding two months, but does not
include :a). Any contribution paid by the employer to any pension
fund or Provident fund, or under this act;
b). Any traveling allowance or the value of any traveling
concession;
c). Any sum paid to the person employed to defray
special expenses entailed on him by the nature of his
employment ; or
d). Any gratuity payable on discharge.

WAGES Defined
The above definition has three parts
1. All remuneration paid or payable in cash to an
employee following from the term of employment
(including agreement) express or implied. The
periodicity of payment is not relevant in this case.
2. Any additional remuneration even if not flowing from
any agreement or settlement but paid at intervals not
exceeding two months.
3. The exceptions as provided in Clause (a) to (d)
above. Any remuneration paid or payable under para
1 and 2 is wages and chargeable to contribution
whereas any amount paid towards items mentioned
in clause (a) to (d) are not wages and therefore no
contribution is chargeable on the amount.

CONSTITUTION OF ESIC
CHAIRMAN AND VICE CHAIRMAN
FIVE MEMBERS
ONE PERSON EACH FROM THE STATES WHERE THE
ACT IS IN FORCE
ONE MEMBER TO REPREST UNION TERRITORIES
10 PERSONS REPRESENTING EMPLOYERS
ORGANIZATIONS
10 PERSONS REPRESENTING EMPLOYEES
ORGANIZATIONS
TWO PERSONS FROM MEDICAL PROFESSION
3 MPS ( 2 FROM LS, 1 FROM RS)
DIRO. GEN. EX-OFFICIO

CONSTITUTION OF
STANDING COMMITTEE

CHAIRMAN
3 MEMBERS OF THE CORPORATION
3 MEMBERS REPRESETING THE STATES
3 MEMBERS FROM THE EMPLOYERS
3 MEMBERS FROM EMPLOYEES
1 FROM MEDICAL PROFESSION
1 FROM MPS
DIRECTOR GENERAL EX-OFFICIO

MEDICAL BENEFIT COUNCIL

DIRECTOR GENERAL-ESIC, CHAIRMAN
DIRECTOR GENERAL HEALTH SERVICES COCHAIRMAN
MEDICAL COMMISSIONER OF THE CORPORATION
1 MEMBER FROM EACH STATE
3 MEMBERS FROM EMPLOYERS
3 MEMBERS FROM EMPLOYEES
3 FROM MEDICAL PROFESSION (OE HAS TO BE A
FEMALE)

Finance and fund

Ch-III
Employee State Insurance Fundaccountable for managing the
contributions and all other receivables by
the corporation
Account to be maintained in RBI or such
other bank as approved by central govt

Expenses permitted
Payments of benefits and provisions for medical
treatment to the insured person and family
Payment of fees and allowances to members of the
corporation and other bodies formed under the act
Salary and other emoluments to the employees of
the corporation
Establishment and maintenance of hospitals,
dispensaries and other institutions
Payments under any decree or order or award
Such other headings authorised by corporation with
approval of central govt

Contributions
Ch-IV
The Scheme is primarily funded by contribution raised
from Insured Employees and their employers
Payable such as
1. Employees Contribution 1.75% of the Wages
2. Employers Contribution 4.75% of the Wages
TOTAL
- 6.5 % of the Wages
Employees in receipt of an average daily wage of
Rs.100/- or Less, are exempted from Payment of their
share of contribution but are entitled to all social security
benefits under the Scheme.

Contribution & Benefit Period

Employees covered under the ESI Act, are required to
pay contribution towards the scheme on a monthly basis.
A contribution period means a six month time span from
1st April to 30th September and 1st October to 31st March.
Cash benefits under the scheme are generally linked with
contributions paid. The benefit period starts three months
after the closure of a contribution period. The two type of
periods are elucidated below.
Contribution Period
Benefit Period
1st April to 30th September
1st January to 30th June
of the following year
1st October to 31st March
1st July to 31st Dec.

ADVANTAGES OF EMPLOYERS
1. Employers are absolved of their liabilities of
providing medical facilities to employees and their
dependents in kind or in the form of fixed cash
allowance, reimbursement of actual expenses,
lump sum grant or opting for any other medical
insurance policy of limited scope unless it is a
contractual obligation of the employer

ADVANTAGES OF EMPLOYERS
2). Employers are exempted from the applicability of
the : (a). Maternity Benefit Act
(b). Workmen's Compensation Act
in respect of employee covered under the ESI
Scheme
3). Employers have their disposal, a productivity ,
well secured workforce, an essential ingredient
for better productivity

ADVANTAGES OF EMPLOYERS
4). Employers are absolved of any responsibility in
times of Physical distress of workers such as
sickness, employment injury or Physical
disablement resulting in loss of wages, as the
responsibility of Paying cash benefits shits to the
corporation in respect of insured employees
5). Any sum paid by way of contribution under the

ESI Act is deducted in computing income under

the Income Tax Act

Benefits to Employees

Free medical treatment is offered to insured employees at hospital

and dispensaries run by the E.S.I. Corporation.

Periodical payments to the insured employee for the period of

sickness at specified standard benefit rate.

Periodical payments to woman employee in case of confinement, or

miscarriage or sickness from pregnancy etc leave for 12 weeks, of
which not more than 6 weeks should be preceding confinement.

Injury in the course of employment resulting in temporary/permanent

disablement entitles the covered employee to a regular payment to
substitute his lost wages.

Contd..
Death in the course of employment entitles specified
dependent of the deceased employee to a cash benefit
payable up to the day of his death.
Death due to injury sustained in the course of
employment or due to an occupational disease entitles
the employees dependents to a benefit in the form of
pension.
One time payment of Rs.10000 to help meet funeral
expenses of the covered employee.

Benefits to Employees
ESI Scheme Major Social Security Benefits in Cash and
Kind include
1. Medical Benefit for self & Family
2. Sickness Benefit for self
3. Maternity Benefit - for self
4. Disablement Benefit
a). Temporary Disablement Benefit for self
b). Permanent Disablement Benefit for self
5. Dependents Benefit for dependents in case of death
due to employment injury

Benefits to Employees
In addition, the Scheme also provides
some other need based benefits to insured
workers. These are:
i). Funeral Expenses to a person who
performs the last rites of IP
ii). Rehabilitation allowances for self
iii). Vocational Rehabilitation - for self
iv). Old age Medicare for self and spouse
v). Medical Bonus for insured women and
IPs wife

Medical Benefit
Medical Benefit means free, full and comprehensive medical
care to IPs and their families.
Insured worker and members of his family are eligible for
medical care from the very first day of the worker coming
under ESI Scheme.
A worker who is covered under the scheme and contributes
at least for 78 days in a contribution period the eligibility is
there up to the end of the corresponding benefit period.
EXTENDED UPTO TWO YEARS FOR CHRONIC AND
LONG-TERM DISEASES. TREATMENT CONTINUES
EVEN IF PERSON GOES OUT OF COVERAGE, TILL
SICKNESS ENDS.

Medical Benefits
1. Out patient treatment
2. Domiciliary
treatment
3. Super specialty
treatment
4. Specialist
consultation and
diagnostic facilities
5. In-Patient treatment
6. Free supply of drugs
and dressings.
7. X-ray and laboratory
investigations

8.
9.
10.
11.
12.
13.

14.

Vaccination and preventive

inoculations
Ante-natal care, confinement and
post natal care
Ambulance Service or conv. charges
Free diet during admission
Free supply of artificial limbs, and
appliances for physical rehabilitation
Family welfare services and other
national health programmed
services
Medical certification

Sickness Benefit
Sickness signifies a state of health necessitating
Medical treatment and attendance and
abstention from work on Medical grounds.
Financial support extended by the corporation in
such a contingency is called sickness Benefit

Sickness Benefit
General Sickness
Extended Sickness
Enhanced Sickness

GENERAL SICKNESS
General Sickness represents periodical cash
payments made to an IP during the period of certified
sickness
And when IP requires medical treatment and
attendance with abstention from work on medical
grounds.
Sickness benefit is roughly 50% of the average daily
wages and is payable for 91 days during 2
consecutive benefit periods.

ELIGIBILITY CONDITIONS

An IP should have paid contribution for not

less than 78 days during the corresponding
contribution period.
A person who has entered into insurable
employment for the first time has to wait for
nearly 9 months for becoming eligible to
sickness benefit.

Extended Sickness Benefit

Extended Sickness Benefit is a Cash
Benefit paid for prolonged illness due to
any of the 34 Specified diseases

EXTENDED SICKNESS BENEFIT (ESB)

An IP suffering from certain long term diseases is entitled
to ESB
ESB includes 34 diseases which are grouped in 11 groups
as per International Classification of diseases
To be entitled to the Extended Sickness Benefit an Insured
Persons should have been in continuous employment for 2
years or more at the beginning of a spell of sickness.
ESB shall be payable for a period of 124 days initially and
may be extended up to 309 days in chronic suitable cases.

Extended Sickness Benefit

The daily rate of Extended Sickness
Benefit is 40% more than the standard
Sickness Benefit rate admissible
After exhausting sickness Benefit Payable
for 91 days the Extended Sickness Benefit
is payable upto further period of 124/ 309
days that can be extended upto 2 years in
special circumstances

Enhanced Sickness Benefit

IPs/IWs for undergoing operations for family welfare are
paid of enhanced Sickness Benefits.
Leave up to 7 days in the case of IPs (Male) and up to
14 days in the case of the IWs (Female) from the date
of operation or from the date of admission in the
hospital.
Insured Persons eligible to ordinary sickness benefit are
paid enhanced sickness benefit at double the rate of
sickness benefit i.e., about full average daily wages.

Maternity Benefit
Maternity Benefit is cash payable to an Insured
women for the specified period of abstention
from work for confinement or mis-carriage or for
sickness arising out of pregnancy, confinement
premature birth of child or miscarriage
confinement connotes labour after 26 weeks of
pregnancy whether the result issue is alive or
dead,
Criminal abortion or miscarriage does not,
however, entitle to benefit.

Maternity Benefit
For entitlement to maternity benefit, the insured
woman should have compulsorily work for 55days with
in 9month from the date of employment.
Maternity Benefit is payable for a period of 12 weeks
(84 days) to an Insured Woman.
Miscarriage or Medical Termination of Pregnancy
(MTP)-payable for 6 weeks (42 days) from the date
following miscarriage.

Contd..
Sickness arising out of Pregnancy, Confinement,
Premature birth-payable for a period not exceeding
one month
In the event of the death of the Insured Woman during
confinement leaving behind a child, Maternity Benefit
is payable to her nominee
Maternity benefit rate is double the Standard Benefit
Rate, or roughly equal to the average daily wage.

Maternity Benefit
Medical Bonus
Medical Bonus is lump sum payment
made to an Insured woman or the wife of
an insured person in case she does not
avail medical facility from an ESI hospital
at the time of delivery of a child. This
bonus of Rs. 250/- has been increased to
Rs. 1000/- from 1st April 2003

Disablement Benefit
Disablement benefit is benefit provided to IP for any
personal injury caused by an accident or by an
occupational disease arising out of employment of the
employee in a covered factory or establishment.

There are two types of disablement Benefit

Temporary Disablement Benefit (TDB)
Permanent Disablement Benefit (PDB)

Disablement benefits
A person shall be qualified to claim disablement benefits
for temporary disablement for not less than three days
(excluding the day of accident) for the period of such
disablement sustained as an employee under the Act.
A person shall be qualified to claim periodical payment
for permanent disablement sustained as an employee
under the Act whether total or partial, for such
disablement : Provided that where permanent
disablement, whether total or partial, has been assessed
provisionally for a limited period or finally, the benefit
provided under this rule shall be payable for that limited
period, or as the case may be, for life.

 The daily rate of disablement benefit shall be ninety per cent.

of the standard benefit rate in the contribution period
corresponding to the benefit period in which the employment
injury occurs, rounded to the next higher rupee : Provided that
where an employment injury occurs before the
commencement of the first benefit period in respect of a
person, the daily rate of disablement benefit shall be
(i) where a person sustains employment injury after the expiry of
the first wage period in the contribution period in which the
injury occurs, ninety per cent. of his average daily wages in
that wage period, rounded to the next higher rupee ;
(ii) where a person sustains employment injury before the expiry
of the first wage period in the contribution period in which the
injury occurs, ninety per cent. of his wages actually earned or
which would have been earned, had he worked for a full day
on the date of accident, rounded to the next higher rupee.

Explanation. The disablement benefit calculated as aforesaid shall be called

the full rate .
The disablement benefits shall be payable to the insured person as follows :
(a)for temporary disablement, at the full rate ;
(b)for permanent total disablement, at the full rate ;
(c)for permanent partial disablement resulting from an injury specified, in Part II
of the Second Schedule, at such percentage of the full rate which would have
been payable in the case of permanent total disablement, as specified in the
said schedule as being the percentage of the loss of earning capacity caused
by the injury ;
(d)for permanent partial disablement resulting from an injury not specified in Part
II of the Second Schedule, at such percentage of the full rate payable in the
case of permanent total disablement

Disablement Benefit
a). Temporary disablement benefit :

TDB is payable to an employee who suffers employment injury (EI) or

Occupational Disease and is certified to be temporarily incapable to work.

Disablement benefit is admissible to insured person for the entire period so

certified by an Insurance Medical officer / Practitioner for which IP does not
work for wages.

From day one of entering insurable employment & irrespective of having

paid any contribution in case of employment injury. Temporary Disablement
Benefit at the rate of 90% of wage is payable so long as disability
continues.

However, not payable if the incapacity lasts for less than 3 days excluding
the date of accident.

Permanent disablement benefit

In case an employment injury or occupational disease
results in permanent, partial or total loss of earning
capacity,
Periodical payments are made to the IP for life at a rate
depending on the actual loss of earning capacity as may be
determined and certified by a duly-constituted Medical
Board.
The benefit is paid at the rate of 90% of wage in the form of
monthly payment depending upon the extent of loss of
earning capacity as certified by a Medical Board
In order to take care of real value of the periodical
payments of Permanent Disablement benefits, against rise
in the cost of living index, periodical increases are granted,
based on actuarial calculation

Dependents Benefit
Dependents Benefit is a monthly pension payable to the
eligible dependents of an insured person who dies as a
result of an Employment Injury or occupational disease
There are no contributory conditions for qualifying to this
benefit. Thus, if a person dies of employment injury even
on the first day of his employment, his dependants are
entitled to the benefit.

 Beneficiaries and Duration of benefit

a). Widow / widows during life or until remarriage
b). Legitimate or adopted son until age 18 or if legitimate
son is infirm, till infirmity lasts.
c). Legitimate or adopted unmarried daughter until age
18 or until marriage, whichever is earlier, or if infirm, till
infirmity lasts and she continues to be unmarried.
In the absence of any widow or legitimate child, the
benefit is payable to a parent or grandparent for life, to
any other male dependent until age 18 or to an
unmarried or widowed female dependent until age 18.

Dependents Benefit
How much ???
The total divisible benefit is equivalent to the temporary
disablement benefit rate. The widow / widows share 3/5th
of the benefit and the legitimate or adopted son and
daughter 2/5th each of the benefit. If the total benefit so
divided exceeds the full rate, there is a proportionate
reduction in the respective shares of the beneficiaries.
The amount of pension paid to the dependents of a
deceased insured person is reviewed vis--vis the cost of
living index and increases are granted from time to time to
compensate for erosion in its real value.

Other Benefit
(i). Funeral Expenses
Funeral Expenses are in the nature of lump
sum payment up to a maximum of Rs.10000/made to defray the expenditure on the funeral
of deceased IP. The amount is paid either to
the eldest surviving member of the family or, in
his absence, to the person who actually incurs
the expenditure on the funeral.

Rehabilitation Allowance
PHYSICAL REHABILITATION
Disabled insured persons who remain admitted in an artificial
limb centre for fixation or repair or replacement of the
artificial limb are entitled to rehabilitation allowance for each
day on which they remain admitted at Artificial limb centre at
double the standard sickness benefit rate. This is not subject
to any contributory condition.

VOCATIONAL REHABILITATION
This Scheme has been designed to provide financial
assistance to the insured persons who are referred to
vocational rehabilitation centre for training.
Insured person who satisfy following conditions are entitled
to avail benefits of the vocational rehabilitation scheme.
1. whose permanent loss of earning capacity has been
determined as 40% or more.
2. who is in receipt of permanent disablement benefit under
the ESI Act, 1948.
3. who is not in any gainful employment, and
4. who is not more than 45 years of age on the date of his
application.

Obligation of the Employers

To get his factory or establishment registered with E.S.I.
Corporation and obtain employers Code Number.
To obtain declaration from the employees covered and
submit same to E.S.I. office and obtain employees
Insurance Number and Identity Cards.
To deposit employees and his own contributions.
To furnish Returns of Contributions.
Not to reduce the wages of an employee on account of
contribution made by him.
To maintain prescribed records/registers.

Contd..
To report to the E.S.I. authorities of any accident,
arrange for first-aid and transportation of employee to
the hospital.
To inform E.S.I. office, dispensary/hospital in case of
death of an employee immediately.
Not to put to work any sick employee and allow him
leave if he has been issued the prescribed certificate.

Obligation of the Employers

Maintain the following records/ registers properly for the
purpose of inspection
1. Attendance Registers / Muster Rolls (in respect of all
employees including those employed through
contractors)
2. Wage register
3. Cash Book / Bank Book
4. Account Books including Ledgers and Vouchers,
Balance Sheet.
5. Employees Register
6. Accident Book
7. Returns of Contribution
8. Return of Declaration Forms
9. Copies of Challans
10. Inspection Book