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This article has been written by Shruthi Nair pursuing the Diploma in Labor, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho


The Employees’ State Insurance Act of 1948 envisioned an integrated need-based social insurance scheme to protect workers’ interests in situations such as sickness, maternity, temporary or permanent physical disablement, and death due to an occupational injury resulting in a loss of wages or earning capacity. Workers and their immediate families are likewise entitled to reasonable medical treatment under the Act. The ESI Corporation was established by the Central Government following the passage of the ESI Act to administer the Scheme. Employers were also relieved of their responsibilities under the Maternity Benefit Act of 1961 and the Workmen’s Compensation Act of 1923. Employee benefits offered under the Act are also in accordance with ILO norms.

The ESI Act, 1948

The ESI Act established in 1948 provided for the following.

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The Act applies to non-seasonal factories employing 10 or more people under Section 2(12). The Scheme has been extended to stores, hotels, restaurants, theaters including preview theaters, road-motor-transport operations, and newspaper establishments that employ 10* or more people under Section 1(5) of the Act.

The Scheme has also been extended to private medical and educational institutions employing 10* or more people in specified States/UTs under Section 1(5) of the Act. The ESI Scheme is operational in 526 districts throughout 34 states and union territories, including 346 complete districts, 95 district headquarters, and 85 districts. The plan is in place in the centers. Arunachal Pradesh and Lakshadweep have yet to adopt the plan.


The ESI Scheme, like most Social Security Schemes around the world, is a self-funding health insurance programme. Contributions are collected as a predetermined proportion of salaries from covered employees and their employers. According to the Act, state governments are required to contribute 1/8th of the cost of medical benefits, up to a maximum of Rs. 1500/- per insured person per year. Any additional expense by state governments that exceeds the ceiling and does not fall within the shared pool is borne by the respective state governments.


Because the E.S.I. Scheme is a contributory scheme, all employees in factories or enterprises covered by the Act must be insured in accordance with the Act’s provisions. In the case of an employee, the contribution payable to the Corporation will be made up of both the employer’s and the employee’s contributions at a set rate. From time to time, the rates are adjusted.

An employer is responsible for paying his contribution for each employee and deducting employee contributions from wages bills, and must pay these contributions to the Corporation at the above stipulated rates within 15 days of the last day of the calendar month in which the contributions are due. The Corporation has authorized the State Bank of India and other institutions to accept payments on its behalf.


There are different kinds of benefits that the workers are subjected to

  • Medical Benefit- From the moment an insured person starts insurable employment, they and their family receive full medical care. There is no limit on how much an Insured Person or a family member can spend on treatment. On payment of a nominal annual premium of Rs.120/-, medical care is also provided to retired and permanently disabled covered persons and their spouses.
  • Sickness Benefit (SB)- During periods of ”certified sickness” for a maximum of 91 days per year, insured workers are entitled to Sickness Benefit in the form of cash compensation at the rate of 70% of salaries. To be eligible for illness benefits, the insured worker must contribute for 78 days during the course of a 6-month period.
  1. Extended Sickness Benefit (ESB)- SB can be extended for up to two years in the case of 34 malignant and long-term conditions at a rate of 80% of salaries.
  2. Enhanced Sickness Benefit- Insured persons undergoing sterilization for 7 days/14 days for male and female workers, respectively, are entitled to an Enhanced Sickness Benefit equal to their full earnings.
  • Maternity Benefit (MB)- Maternity Benefit during confinement/pregnancy is payable for twenty-six (26) weeks, with a one-month extension on medical advice, at the full salary rate, subject to payment for 70 days in the preceding two Contribution Periods.
  • Disablement Benefit- 
  1. Temporary disablement benefit (TDB)- From the first day of insurable employment, regardless of whether or not any contribution has been paid in the event of an occupational accident. For as long as the disability lasts, a 90 percent of wage Temporary Disablement Benefit is paid.
  2. Permanent disablement benefit (PDB)- The benefit is paid in the form of monthly payments at a rate of 90% of wage, depending on the level of loss of earning capacity as determined by a Medical Board.
  • Dependents Benefit (DB)- In circumstances when a deceased Insured person dies as a result of an employment accident or occupational hazard, DB pays the dependents of the deceased Insured person 90 percent of his or her earnings in the form of a monthly payment.
  • Other Benefits-
  1. Funeral Expenses- From the first day of insurable employment, a sum of Rs.15,000/- is payable to dependents or the person performing final rites.
  2. Confinement expenses- In the event that his wife is imprisoned in a location where necessary medical facilities under the ESI Scheme are not available, an insured woman or an I.P.

Insured workers are also provided with various other need-based benefits under the scheme.

  • Vocational rehabilitation- For undergoing VR Training at VRS, to a permanently disabled insured person.
  • Physical Rehabilitation- In case of physical disablement due to employment injury.
  •  Old age medical care- Insured person retiring at the age of superannuation or under VRS/ERS, and person forced to leave employment due to permanent disability insured person and spouse on payment of Rs. 120/- per annum.
  • Rajiv Gandhi Shramik Kalyan Yojana- This Unemployment Allowance programme came into effect on April 1, 2005. An insured person who becomes unemployed after three years of coverage due to factory/establishment closure, retrenchment, or permanent infirmity is eligible to the following benefits:
  1. Unemployment Allowance equal to 50% of salary for a maximum of two years.
  2. ESI Hospitals/Dispensaries provide medical care for IP and his family throughout the time he is receiving unemployment benefits.
  3. Vocational training is provided to upgrade skills; ESIC pays for the fees and travel allowance.
  • Incentive to employers in the Private Sector for providing regular employment to the persons with disability- Physically Disabled Persons must earn a minimum wage of Rs 25,000/- to be eligible for ESIC benefits and the Central Government pays the employers’ payment for three years.

Effect on the ESI Act due to COVID-19

Given the current condition of circumstances in our country as a result of the global epidemic that has been ravaging the world for the past two years, it is only natural that the ESI Act of 1948 has become obsolete. When the Act was enacted in 1948, it took into account the people’s lifestyle and health at the time. There have been significant changes over the years that have eventually led to the emergence of a global pandemic, and the ESI Act of 1948, unsurprisingly, cannot prepare for the consequent circumstances. The Act’s ineffectiveness in the current situation is due to the dramatic increase in the cost of treatments, the number of patients, and mortality.

The Employees’ State Insurance Corporation (ESIC), chaired by Santosh Kumar Gangwar, Minister of State for Labor and Employment, took some crucial decisions on August 20 to improve its service delivery mechanism and provide relief to workers afflicted by the Covid-19 outbreak. the measures taken by ESIC during COVID19 pandemic include-

  • Relaxation of qualifying requirements and increased relief payments under the Atal Bimit Vyakti Kalyan Yojana

The Atal Bimit Vyakti Kalyna Yojna, which pays unemployment benefits to workers covered by the ESI Scheme, is being implemented by ESIC. The ESI Corporation has agreed to continue the program for another year, until June 30, 2021. It was determined to loosen the existing requirements and the amount of compensation for workers who lost their jobs during the COVID-19 outbreak. The greater relief under the relaxed criteria will be paid from March 24, 2020, to December 31, 2020. The programme will then be offered with the original qualifying conditions from January 1, 2021 to June 30, 2021. These parameters will be reviewed after December 31, 2020, based on the need and desire for such a relaxed state.

  • Establishment of ICU/HDU services at 10% of total beds in ESIC Hospitals

In order to boost ICU/HDU services in ESIC hospitals in the face of the Covid-19 pandemic, it has been agreed to develop ICU/HDU services in all ESIC hospitals up to 10% of total commissioned beds.

  • Measures taken by ESIC during COVID-19 pandemic

The members of the ESI Corporation in attendance praised ESIC’s efforts to mitigate the impact of COVID-19 on its stakeholders while also providing infrastructure for medical treatment to the general public. So far, 23 ESIC hospitals throughout India have been designated as COVID-19 Dedicated Hospitals, with around 2600 isolation beds and 1350 quarantine beds to deliver COVID-19 medical services to the general public.

In addition to the aforementioned, 961 Covid Isolation Beds are accessible in most remaining ESIC Hospitals across the country, bringing the total number of Covid Isolation Beds in ESIC Hospitals to 3597. In addition, these hospitals now contain a total of 555 ICU/HDU beds, as well as 213.


The Employees’ State Insurance Act of 1948 was enacted to protect workers in the event of sickness, maternity, disablement, or death as a result of work-related injuries, as well as to provide medical care to covered employees and their families and continued to be of help until recent times. The ESI Corporation’s recent changes ensure that the Act continues to benefit the public. Taking into account the numerous issues that have been pressed during this epidemic, the amendments have helped the Act to maintain its importance and necessity while not jeopardizing the benefits that affected persons can claim.

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