All About Employees State Insurance Scheme

All about Employees State Insurance Scheme

In 2012, about 22% of the Indian population is below the poverty line and most of them are workers who work in factories and industries. These workers, if they face any accidental injury, disability or death, face severe financial consequences because their family depends on their earnings. That is why a social security scheme is needed to cover the financial loss faced by workers and their dependents in case of accidental contingencies suffered during their work.

Keeping this sentiment in mind, the Employees’ State Insurance Act was passed by the Parliament in the year 1948. This Act intended to formulate a social security scheme for the workers belonging to the economically weaker sections of the society. The Act included the health-related contingencies commonly faced by workers like sickness, disablements, maternity, occupational illnesses or diseases, injury, death, loss of earning capacity, etc. The Act then laid down the provisions which would be applicable in case the workers face any of these health-related emergencies over the course of employment and the Employees’ State Insurance Scheme was born. Let’s understand the scheme in details –

What is the Employees’ State Insurance Scheme (ESIS)?

The Employees’ State Insurance Scheme is a social security scheme which covers the financial loss suffered by employees when they fall sick, become disabled or die due to employment-related injuries. The scheme is a self-finances scheme which is managed and run by the Employees’ State Insurance Corporation.

What is the Employees’ State Insurance Corporation?

The Employees’ State Insurance Corporation is a statutory body which oversees and governs the running of the Employees’ State Insurance Scheme. The Employees’ State Insurance Corporation (ESIC) was formed as per the provisions of the Employees’ State Insurance Act, 1948. The Employees’ State Insurance Corporation is headquartered in New Delhi and has 23 regional offices, 800 local offices and 26 sub-regional offices. All the offices of the Employees’ State Insurance Corporation are tasked with the implementation and monitoring of the ESIS.

Employees’ State Insurance Corporation Composition

The Employees’ State Insurance Corporation is made up of the following members –

  1. The Director-General of the Employees’ State Insurance Corporation (ex-officio)
  2. A chairman who is appointed by the Central Government
  3. A vice-president who is appointed by the Central Government
  4. Up to 5 individuals who are nominated by the Central Government
  5. One individual to represent each Indian State. This individual is also appointed by the Central Government
  6. One individual to represent each Union Territory of India. This individual would be appointed by the Central Government
  7. 10 individuals who would represent employers. These people would be nominated by the Central Government
  8. 10 individuals who would represent the employees and be nominated by the Central Government
  9. 2 individuals who would represent the medical profession. They would be nominated by the Central Government
  10. 2 members of Lok Sabha and 1 member of Rajya Sabha totalling 3 Members of Parliament 

Eligibility for Employees’ State Insurance Scheme (ESIS)

The Employees’ State Insurance Scheme is applicable to the employees/workers of organisations –

  1. Non-seasonal factories as defined under Section 2 (12) of the Employees’ State Insurance Act, 1948
  2. Under Section 1(5) coverage is allowed to the following –
    • Restaurants
    • Motor road transports
    • Newspaper establishments
    • Hotels
    • Shops
    • Movie theatres or any other types of theatres
    • Private medical institutions
    • Education institutions
  3. Other establishments as defined under the Employees’ State Insurance Act, 1948

    These establishments can opt for ESIS if they have at least 10 workers and the wages of the workers is up to INR 21,000. Moreover, in the case of Maharashtra and Chandigarh, the establishments should have a minimum of 20 workers with wages up to INR 21,000 to opt for the ESIS scheme.

Features of ESIS:

The Employees’ State Insurance Scheme has the following salient features –

  1. The scheme not only covers eligible workers, but it also covers their dependents
  2. The scheme pays a daily or monthly cash allowance for different types of medical contingencies faced by workers
  3. The scheme is easy to apply and provides good benefits
  4. The contribution is done by both workers and employers thereby building a good corpus for meeting the different types of medical expenses
  5. Even unemployed individuals can avail benefits if they were previously insured under the scheme
  6. The scheme provides coverage for retired members too if they pay nominal premiums

How does ESIS work?

As mentioned earlier, ESIS is a self-financing scheme wherein the covered workers and their employers contribute towards the scheme. The contribution is expressed as a fixed percentage of the wages of the workers. This percentage is as follows –

  1. Employee’s contribution – 1.75% of the wage
  2. Employer’s contribution:
    1. For existing areas – 4.75% of the wage
    2. For newly added areas – 3% of the wage for the first 2 years

      Moreover, if the daily average wage of the employee is INR 137 or below, the employee does not have to make a contribution towards ESIS. The employer would, however, have to contribute his share towards the scheme even if the employee is exempted.

The State Government also contributes towards the scheme. The Government’s contribution is 1/8th of the expense incurred on the medical benefits provided to employees up to a maximum of INR 1500 per insured worker per year. Any additional expense which is more than the contributions made by the employees, employers and the Government would also be borne by the State Government.

The employer is required to contribute the total contribution, including the employee’s share, to the scheme. The contribution should be deposited with the Employees’ State Insurance Corporation within 15 days from the end of the month. The deposit can be done online or through the branches of authorized public sector banks

The contribution period and the cash benefit period are divided into two blocks. These are as follows:

  1. If the contribution period is between 1st April and 30th September, the cash benefit period would be between 1st January and 30th June of the next year
  2. If the contribution period is between 1st October and 31st March, the cash benefit period would be between 1st July and 31 December of the same year

What is covered under ESIS?

The benefits payable under the State Insurance scheme for employees are laid down under Section 46 of the Employees’ State Insurance Act, 1948. These benefits are as follows –

  1. Medical benefit

    Medical coverage is provided to the injured worker as well as his/her family members if they fall ill. There is no limit on the medical expenses which are covered under the scheme. The scheme pays the incurred medical expenses fully. Retired and permanently disabled workers who are/were insured under ESIS and their respective spouses can also avail medical coverage is they pay a premium of INR 120.

  1. Sickness benefit

    If the insured worker falls sick and misses work, this benefit pays compensation during the sickness period. The compensation is paid at the rate of 70% of the employee’s wage and it is payable for a maximum of 91 days per year. To be eligible to receive the sickness benefit, the insured employee should have made his contribution for at least 78 days in a six-month contribution period as mentioned above.

    Sickness benefit also includes Extended Sickness Benefit and Enhanced Sickness benefit. Let’s understand what these benefits are –

    1. Extended Sickness Benefit:

      Under the Extended Sickness Benefit, the sickness benefit is payable for up to 2 years @ 80% of the wages. This is applicable in case of 34 specific long term and malignant ailments as defined in the Employees’ State Insurance Act, 1948.

    2. Enhanced Sickness Benefit

      Under this benefit, the full wage is paid to the insured employee who undergoes sterilization. The benefit is payable for 7 days for males and 14 days for females.

  1. Maternity benefit

    If the insured employee is pregnant, a maternity benefit is payable under the ESIS scheme. This benefit is payable for 26 weeks. The benefit duration can also be extended by another month if it has been advised by the doctor. The benefit is equal to the full wage of the worker and is payable only if the worker has contributed for at least 70 days in the last two contribution periods.

  1. Disablement benefit

    Disablement benefit is further subdivided into two categories depending on the type of disability suffered. These variants are as follows –

    1. Temporary Disablement Benefit

      If the worker becomes temporarily disabled and unable to work, a temporary disablement benefit is paid. This benefit is paid at the rate of 90% of the wage and is payable for as long as the disability persists.

    2. Permanent Disablement Benefit

      If the employee becomes permanently disabled, a permanent disablement benefit is paid. The rate of payment is 90% and the benefit is paid in the form of monthly payments. The payment of the benefit, however, would depend on the extent of loss suffered which should be certified by a Medical Board.

  1. Dependants Benefit

    If the insured worker dies due to employment-related injuries or sickness, a dependants benefit is payable to the dependents of the insured. This benefit is paid @90% of the wage of the employee and is paid monthly.

  1. Funeral expenses

    In case of death of the insured, INR 15,000 is paid as funeral expenses to the dependant of the insured who does the last rites of the deceased employee.

  1. Confinement expenses

    Confinement expenses are paid if an insured female worker or the wife of an insured male worker is confined to a place where the facilities available under ESIS are not available.

  1. Vocational Rehabilitation

    Training is imparted to permanently disabled workers for their rehabilitation.

  1. Physical rehabilitation

    Rehabilitation facilities are provided to workers who face physical disablement because of their occupation.

  1. Old age medical care

    If the insured employee retires after attaining the retirement age or under the VRS or ERS scheme, old age medical care can be availed if a premium of INR 120 is paid. This benefit is also available to employees who had left work due to permanent disability and their spouses if the premium is paid.

  1. Rajiv Gandhi Shramik Kalyan Yojana

    This is a scheme of unemployment where an allowance is paid to the unemployed worker if the worker becomes unemployed after being covered for at least 3 years and the reason of unemployment is closing of the establishment, permanent invalidity or retrenchment.

    The allowance payable would be as follows –

    1. 50% of the wage would be paid as unemployment allowance for up to 2 years
    2. Medical care would be payable to the insured and his/her family during the period when the allowance is paid
    3. Vocation al training would be provided so that the unemployed worker can upgrade his/her skills. The expenses incurred on travelling for the training would be borne by the Employees’ State Insurance Corporation.
  1. Atal Beemit Vyakti Kalyan Yojana

    Employees covered under Section 2 (9) of the Employees’ State Insurance Act, 1948 can avail this scheme. If the employee is rendered unemployed, the scheme pays cash compensation for a maximum of 90 days. The compensation can be claimed only once in the lifetime of the employee and is available if the employee is unemployed for three or more months. To be eligible for the scheme, the employee should have worked for two insurable years and must have contributed for at least 78 days in the last four contribution periods. The compensation would not be more than 25% of the average daily wage of the worker. The scheme came into effect in the year 2018 and is a pilot scheme for the next two years only.

  1. The incentive for employing disabled

    If private sector employers give regular employment to individuals with a disability, the employers’ contribution to ESIS would be borne by the Central Government for three years. Moreover, physically disabled individuals enjoy a higher minimum wage limit of INR 25,000 to be eligible for ESIS.

Why is ESIS beneficial?

The Employees’ State Insurance Scheme proves beneficial for employees as well as employers. It has the following benefits –

  1. The scheme takes care of the employers’ responsibilities in providing for their employees’ medical needs in case of contingencies. Employers can, therefore, be financially free. They don’t have to compensate their employees in case of any contingency suffered over the course of employment as the scheme takes care of it for them
  2. Since the scheme pays the employees a benefit based on their wages, the employees don’t lose out the wages which they could have earned if they would not have faced a medical contingency. The scheme, therefore, prevents the loss of wages
  3. Since dependents are also covered, the injured worker does not have to bother about meeting the medical expenses of his/her family members if they fall ill
  4. The scheme ensures that females do not lose their wages due to pregnancy
  5. Retired and unemployed members can also avail the benefits of the scheme if they pay a very low amount of premium. Thus, the scheme provides affordable coverage to members who have left employment
  6. The contributions are very low and compared to them the workers can receive enhanced coverage benefits.

The success of the scheme

When the ESIS scheme was launched in the year 1952, only two cities were covered – Delhi and Kanpur. However, today, the scheme is spread across 843 centres across 33 States and Union Territories. More than 7.83 lakh factories and establishments are covered under the Employees’ State Insurance Act, 1948. The scheme covers more than 2 crore individuals and has a beneficiary count of 8.28 crores.

How to register for ESIS?

To register for the Employees’ State Insurance Scheme, eligible employers should download Form 1 in PDF version. This form is the Employers Registration Form which is required to be filed by employers to register themselves and their workers under ESIS. The form can then be submitted online whereupon it would be checked and verified by the Employees’ State Insurance Corporation and if everything is proper, the scheme would be issued.

Documents required for registering with ESIS

To register under ESIS, the following documents would have to be submitted –

  1. Registration Certificate which has been received under the Factories Act, 1948 or Shops and Establishment Act
  2. The company’s Memorandum of Association and Articles of Association
  3. Certification of Registration if the establishment is a company. In case of partnership firms, a Partnership Deed is required
  4. A list of all the employees who are working in the organisation
  5. PAN cards of a company registering under ESIS as well as its employees
  6. The details of the annual incomes of the employees of the company
  7. Cancelled cheque of the company’s bank account
  8. List of names of the Directors of the company
  9. List of the names of the shareholders of the company
  10. A detailed attendance list of the employees of the company

The Employees’ State Insurance Scheme is a social security scheme which allows multi-faceted coverage benefits to eligible employees. So, if you are an eligible employer opt for the scheme for your employees. Alternatively, if you are an employee, check if you are eligible for the scheme and ask your employer for the same. The benefits are good and are available at very little contributions. So, enrol under the Employees’ State Insurance Scheme and avail the comprehensive coverage benefits offered.

Frequently Asked Questions:

  1. Is the ESIS scheme mandatory?

    Yes, employers are mandated to enrol under the ESIS scheme if they are registered under the Factories Act, 1948 or the Shops and Establishment Act.

  2. How are employers and employees recognised under the scheme?

    A 17-digit unique code called the Employees’ State Insurance Code is allotted to employers who register under ESIS. Similarly, every insured employee is allotted a unique code which helps in identification of the insured establishments and their members.

  3. How to make a claim under ESIS?

    To make a claim, you would have to download Form 15 and fill it up stating the details correctly. The filled form should then be submitted to the Employees’ State Insurance Corporation for claim settlements. The Corporation would assess the claim and settle it.

  4. What would happen if I change jobs?

    Even if you change jobs you can get coverage under ESIS if the new organisation has enrolled under the scheme and you are eligible for coverage after the job change.

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