Employee State Insurance (ESI)

An overview of Employee State Insurance Scheme

India’s Employee State Insurance Scheme (ESI) is a comprehensive social program designed to provide socio-economic security for workers and their dependents. It covers all medical expenses for the contributor and his or her dependents, beginning with the first day of insurable employment.

What is the Employee State Insurance Act, 1948?

The Employee State Insurance Act of 1948 covers various health-related aspects of employment, such as sickness, temporary or permanent disablement, maternity, occupational diseases, and death due to an employment injury, which may result in entire or partial earning capacity.
The Act helps to reduce physical and financial problems by providing medical and financial assistance to insured people and their families. Insured individuals are also eligible for many case benefits during physical suffering caused by illness, temporary or permanent disability, or any medical condition resulting in a loss of earning capability. Dependents of insured persons who die in industrial accidents, workplace injuries, or occupational hazards are entitled to a monthly income known as the dependant’s benefit.
The Employees State Insurance Corporation (ESIC), an autonomous body inside the Central Government of India, administers the ESI plan, which the Ministry of Labour and Employment regulates.

Employee State Insurance Act, 1948(ESI) applicabile For :

The ESI Act applies to all non-seasonal power-using factories with ten or more employees and non-power-using factories and enterprises with twenty or more employees.
The scheme was also expanded to hotels, stores, and other businesses with 20 or more employees.
A provision has been introduced for establishments that participate in dangerous or life-threatening activity. ESI will apply to these establishments even if only one worker is employed.
Provisions for voluntary inclusion have also been implemented, allowing a plantation employer to opt into the ESI scheme by indicating their willingness to the ESI Corporation.
Even if an establishment has fewer than ten employees, voluntary membership under the ESI plan is possible. When an employer and a majority of the employees of an establishment agree to be covered by ESI, the Director General of ESIC may authorise ESI to be applied to such establishments upon the employer’s application.

ESI coverage and contribution:

The ESI Act of 1948 covers all employees, casual, temporary, or contract workers whose gross monthly earnings are less than Rs. 21,000 (effective July 1, 2019).

ESI contribution:

Both employers and employees make ESI contributions. The rate of contribution is:

  • Employee’s contribution – 0.75% of the gross earnings.
  • Employer’s contribution – 3.75% of the gross earnings.

The employer has to calculate and remit a total of 4%.

Employees with daily salaries of up to Rs. 176/—are exempt from making contributions. Employers will, however, contribute their fair share.

Employers are required to deduct the employee contribution from their earnings and pay both the employer and employee contributions at the rate specified within 15 days of the end of each month. Referred branches of the State Bank of India and other banks are authorized to accept contributions on behalf of ESIC.

There are two contribution periods, each lasting six months, and two matching benefit periods, as follows:

Contribution Period

Benefit Period

1st April to 30th Sept

1st Jan of the following year to 30th June

1st Oct to 31st March of the following year

1st June to 31st December

The deadline for filing monthly contributions and paying ESI returns is on or before the 15th of the following month, the month to which the salary fits.

For example, If ESI is deducted from the September salary, the remittance must be made on or before October 15.

Eligibility check period:

Suppose an employee qualifies for ESI because their salary is less than RS.21,000 and gets a raise during the contribution period. In that case, they will continue to receive ESI benefits until the conclusion of that period. They will no longer be eligible for ESI once this period has expired.

ESI benefits:

Benefits under the Employee State Insurance plan are mainly classified as follows:

1.Primary Medical Care

These services are available to the covered individual and their family. There is free treatment available to retired and permanently disabled people, as well as their spouses. To use this benefit, retirees must make an annual token contribution of Rs. 120.

2.Specialists and Diagnostic Services

This policy covers the insured individual and their dependents’ families for specialized consultations at a specialist or diagnostic centre.

3.In-patient care

It is supplied in hospitals built by the ESIC or through bed reservations controlled by the state government or municipal and private organizations. Basically, this program pays for these beds based on the number of days they are occupied.

4.Disablement Benefits

The disablement benefits are divided into two categories:

  • Temporary Disability Benefits – It is payable at a rate of 90% of wages for the duration of disability.
  • Permanent Disability Benefits – It is also payable at 90% of salary in the form of payment. And it is based on the medically recognized loss of earning capacity.

5.Dependent Benefits

It is payable at 90% of salaries in the form of monthly payments to a deceased person’s dependents in circumstances where death occurs as a result of an employment injury or accident.

6.Maternity Benefits

When an insured woman gives birth, she will receive ESI benefits. If she gives birth in a location without ESI medical facilities, she can seek private medical treatment, but she must first obtain consent from the dispensary doctor. Maternity benefits are available for 26 weeks and can be extended by one month if the doctor recommends. She will get these benefits at her regular salary rate as long as she has contributed for 70 days in the last two contribution periods.

7.Unemployment Allowance

 ESIC benefits are offered under the Rajiv Gandhi Shramik Kalyan Yojana scheme to insured persons who have worked in an organization for three years or more. If the factory closes, becomes permanently disabled, or is laid off, the insured person is entitled to an allowance equal to 50% of wages for up to two years, medical care for himself and his family from an ESI hospital/dispensary, and vocational training to upgrade skills and expenses will be covered by ESI.

8.Sickness Benefits

These benefits are provided as financial compensation at 70% of wages earned to covered persons during certified sickness periods lasting 91 days per year. The insured must contribute for 78 days over six months to be eligible for illness benefits.

9.Extendable Sickness Benefits

 It can be extended for up to two years for 34 malignant and long-term conditions at an 80 per cent wage increase.

10.Enhanced Sickness Benefits

For male and female employees, full salaries are paid for 7 or 14 days while they are having sterilization.

11.Miscellaneous Benefits like

Funeral Expenses – The person who performs the last service from the first day of insurable employment or dependents receives Rs.15,000.

12.Old age medical care facilities

Rehabilitation Allowance – This is for permanently impaired persons to undergo VR training at VRS, Also, for physical disability as a result of an employment injury.

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