ESIC

In this article, Nidhi Shetty pursuing M.A, in Business Law from NUJS, Kolkata discusses Everything HR Managers need to know about Employees’ State Insurance Corporation (ESIC).

Introduction to Employees State Insurance Corporation (ESIC)

Employees’ State Insurance or ESI is a self-financing social health and security scheme providing insurance to Indian employees and workers. The Employees State Insurance was constituted to regulate a comprehensive insurance system which would help in safeguarding the needs of the employees in emergency situations like terminal illness, maternity, death, physical or mental disability or long term sickness. This act also extends the reasonable health care benefits to the immediate dependants of the employees and workers. The ESI i.e. Employees State Insurance is governed and administered by the Employee State Insurance Corporation (ESIC). ESIC is constituted in accordance with prior the rules and regulations stipulated in the Employees’ State Insurance Act, 1948.

ESIC is a corporation or an autonomous structure by a statutory creation made under the Ministry of Labour and Employment of the Government of India. The benefits that are bestowed by the ESIC to the workers are in accordance with the International Labour Organization (ILO) Conventions.[1] As the corporation is a legal entity on its own, it can raise loans and take the needful steps and measures for discharging funds and loans with the prior sanction of the central government. Further, it can acquire both movable and immovable property and all incomes derived from the said property shall vest with the corporations.[2]

Background of ESIC

The Government of India appointed Mr. B. P. Adarkar on March 1943, to create a report on health insurance scheme for industrial workers.[3] The report became the basis for the Employment State Insurance (ESI) Act of 1948.[4] The Employees SI Act was enacted in 1948 and came into effect on 24 February 1952.[5] The ESI Act was initially formulated for the factory workers. However, later the Act became applicable to all the establishments which had 10 (Ten) or more workers. As of 2011-12, the total number of beneficiaries is approximately 65.5 million.[6]

ESIC and ESI in Brief

The ESI fund is applicable to all the corporate bodies and establishments which engage a minimum of 20 workers. It is to be noted that these establishments must be covered only in the case where the establishment is located in the area which is tagged as ‘Notified Area’ under the ESI scheme. The ESI scheme which is maintained by ESIC, was initially applied only to the employees or workers who earn Rs. 15,000/- (Rupees Fifteen Thousand Only) or less per month as wages. This included all basic, DA and all allowances payable by cash. However, under a notification issued by Employees’ State Insurance Corporation (ESIC) Authorities, the wage limit of the employee covered was increased under the ESIC scheme from the existing limit of Rs.15, 000 to Rs.21, 000 with effect from January 1st, 2017. This new amendment aimed to bring an estimate of 50 lakh workers under the social security scheme of ESIC and also to bring affordable medical and health care benefits to not just for the workers and employees but also to their immediate dependent family members. The financial aspect need for this scheme is drawn mainly from the employees and the employer. ESI is basically a contributory fund in which both the employer and employee contribute 4.75% and 1.75% respectively to make it a total of 6.5%[7].  Percentage of the contribution of employee’s wage is less than that of the contribution of the employer. As per the norms, the government also contributes in expenses that are incurred during provision of health care. The employer who is payable of contributions in relation to any worker or employee shall make the payment of that contributions within a period of 21 (Twenty One) days of the last day of that particular calendar month in which the contributions fall due;

Contribution Period  

Corresponding Benefit Period

 

1st  April  – 30th September 1st January – 30th June (of following year)
1st  October – 31st March  1st July – 31st December

In case of any disputes or troubles that is related to the ESI scheme, it is heard in ESIC Court.

Advantages to the Employers

  1. The Employer is absolved from the very liability of providing the health care and other medical allowances, reimbursement of any actual medical expenses or any insurance policies related to health.
  2. The Employer is not needed to provide any sick leave, separately to his workers or employees
  • The Employer’s Contribution towards ESI Scheme is stated to be qualified as expenses under the Income Tax Act.

The Relation between ESIC and Human Resources

 “Human resources are like natural resources; they’re often buried deep. You have to go looking for them, they’re not just lying around on the surface. You have to create the circumstances where they show themselves.” [8] the aforementioned quote correctly and clearly defines the aim and purpose of a Human Resource Manager. A Human Resource Manager is defined as ‘a person who in charge of the department that deals with the employment, training, support, records, etc. of a company’s employees’.[9] A Human Resource Manager is rightfully a link between the employer or the company and the employee. Companies put their best efforts to hire the best possible HR Manager for their company as an organization or a company works efficiently only if the Human Resource Team or Manager is sincere and dedicated towards their work, therefore, one needs to find the best possible person to be an HR in Company. The HR Manager’s work is not just limited to dispensing the monthly salary or to manage leave applications or being just the medium between the top management and employers and the lower management for the reasons of communication. The aforementioned duties are definitely vital but are only a part of their job. An HR Manger must be mindful of all the laws and acts made by the Legislation and interpreted by the Judiciary that are related to the benefit of the company and the employees.

As mentioned earlier a Human Resource Manger must be in par with all the legislations and regulations related to the company or the employees. Thus, it is needless to say that every HR Manger should be aware with the ESIC and the ESI funds, as it provides the needy employees the benefits that are bestowed to them by the Government of India.

The Human Resource Managers of every establishment under the ESI scheme are required to firstly identify all the workers and the employees who has an aggregate salary is up to Rs 21,000/- (Indian Rupees Twenty One Thousand Only) per month. Then as per the identification the employees’ CTC is to be carefully restructured. This restructuring shall include the contribution by both the employee and the employer under the scheme. With the help of this new CTC restructuring done by the HR Manager, the ‘Net Take Home’ monthly salary of the workers shall be contemplated. This restructuring of entire CTC and the changes in the monthly net take home salary must be intimated to all employees of the establishment by the HR Manager. Further, the HR Manager must also get IP numbers enrolled of any new employees who shall be covered under the ESI Act and the scheme as soon as possible. Post such enrollment it must be linked with the Aadhaar credentials of the employee.

Under the section 46 of the Employees State Insurance Act, the employees who fall under the bracket of beneficiary of the Act shall receive the following six (6) social security benefits:-

  1. Health care and Medical Benefits: the workers and their family members get entire medical care benefits from the day the worker enters insurable employment. There is no upper limit on the expenditure on the treatment and cure of the Insured worker or his/her immediate family member. Medical and health care is also given to the retired and permanently disabled insured persons and their spouses. However, the retired or the disabled person must comply with rule of paying off a token of Rs.120/- (Rupees One Hundred and Twenty Only) as annual premium
  2. Sickness Benefit: A person insured under the scheme shall be qualified to claim the sickness benefit for any sickness occurring during any benefit term in the case of contribution in respect of him or her which is payable for not less than 78 (Seventy-Eight) days in the corresponding term of contribution and the worker shall also be entitled to receive such benefit at the daily standard benefit rate for the period of his sickness. This form of benefit is provided in mode of cash compensation. The compensation is at the rate of 70% (Seventy Percent) of wages which is then payable to the insured persons. Such compensation is payable during the tenure of the sickness certified. The period of which shall be for a maximum of 9) (Ninety –One) days in one year. The insured employee or worker must contribute for a minimum of 78 (Seventy- Eight) days in a contribution term of 6 months in order to qualify for this sickness benefit.

There are following two Sickness Benefits:

  1. Extended Sickness Benefit: this benefit is extendable up to a period of two (2) years. It is given in the case of listed 34 long-term and malignant sickness or diseases at an enhanced rate of 80% of wages.
  2. Enhanced Sickness Benefit: this Sickness Benefit is equal to a full wage which shall be payable to the sick insured worker who is undergoing a sterilization for a period of 7 day for male and 14 days female workers respectively.

Maternity Benefit for insured female workers

Maternity Benefit fund for pregnancy or confinement shall be payable to the insured worker for a period of three months. This shall be extendable by further maximum of one month. However, this shall only be on medical advice at the rate of full wage and the same shall be in accordance to the contribution for a term of 70 (Seventy) days in the preceding year.

  1. Dependants’ Benefit (DB): the Dependants’ Benefit as the name suggests is the benefits provided to the immediate dependants of the insured workers and employees. This is payable at the rate of 90% (ninety percent) of wage in manner of a monthly payment to the immediate dependants of a deceased Insured worker in the situation where death had occurred due to an injury during his employment or any occupational hazards. Dependants’ benefit shall be paid to the dependents of the insured person who dies as a result of an employment injury, in the following manner:–
  2. In the event of demise of the insured worker, the dependents’ benefits shall be payable to the widow, children of the deceased in the following manner:–
  • Benefit provided to the widow of the deceased insured worker during the term of life until she remarries shall be an amount which shall equivalent to the three-fifths of the full wage rate and, in the event where, there are two or more widows of the deceased worker, the total sum payable to both the widows are as aforesaid and shall be divided equally between the widows;
  • Benefits given to each legitimate or adopted son shall be an amount equivalent to two-fifths of the full wage rate until the son(s) attain the age of eighteen (18) years:

PROVISO:  in the case where a legitimate or adopted son who is infirm, incapable and is completely dependent on the earnings of the deceased insured worker at the time of his death, the dependents’ benefits shall continue to be paid while the infirmity or incompetency lasts;

  • Benefits in case of each legitimate or adopted unmarried daughter shall be a sum which shall be equivalent to two-fifths of the full wage rate until the daughter(s) attain the age of majority i.e. eighteen years (18) or until she gets married, whichever case is earlier:

PROVISO:  In the event where the legitimate or adopted unmarried daughter of the deceased insured person who is infirm, incapable and is completely dependent on the earnings of the insured worker at the time of his demise, the dependants’ benefit shall continue to be paid while the infirmity or the incompetency lasts and till she continues to remain unmarried:

PROVIDED FURTHER: If the total sum of the dependants’ benefit that shall be distributed among the widow(s) and legitimate or adopted children and widowed mother of the deceased person as aforesaid exceed at any time the limit of full wage rate, the share sum of each of the defendants, individually shall be reduced proportionately. This would lead to the total amount payable to the individual descendants to not exceed the amount limit of disablement benefits at the full rate of the wages.

  • Benefit provided to the widowed mother of the deceased insured worker during his/her life term, an amount equivalent to two-fifth of the full rate shall be payable to her as compensation.
  • In the event where the deceased insured worker does not leave behind a widow or legitimate or adopted child/children or a widowed mother, the benefits of immediate dependant shall be payable to remaining dependants as in the following manner:
  • It can be given to a parent of the deceased insured worker other than the widowed mother as mentioned above or also to grand-parent, for their entire life term, at a sum which is equivalent to the three-tenths of the full rate of the wage. In an event, there are two or more parents which shall not include the widowed mother or grand-parents the total amount which shall be payable to the parents or grand-parents as mentioned earlier shall be equally divided between them; to any other–
  • Any male dependant of the deceased insured worker, till he attains the age of eighteen years.
  • Any female dependant, until she attains the age of eighteen years or until marriage, whichever is earlier or if widowed, until she attains the majority age i.e. eighteen years of age or remarries, whichever case is earlier;

Disablement Benefit

There are two types of Disablement Benefits, which are as following

  1. Temporary disablement benefit (TDB): TDB is applied from the first day of entering insurable employment and the same is irrespective of payment of any contribution in any incident of an employment injury or any occupational hazard. This Temporary Disablement Benefit is payable to the insured worker so long as the disability of the insured worker continues at the rate of 90% (Ninety percent) of wage.
  2. Permanent Disablement Benefit (PDB) : The Permanent Disablement Benefit shall be payable at the rate of 90% (Ninety percent) of wage in the manner of a monthly payment which shall depend upon the extent of loss of earning capacity of the insured worker as certified by a designated Medical Board

Other Benefits provided to the insured workers

  • Expenses on Confinement: An Insured worker women or an I.P. in respect of his wife in situation of any confinement which shall occur at a place where the emergency and necessary medical and health care facilities under the ESI Scheme are unavailable or absent.
  • Funeral Expenses: An amount of Rs.10, 000/- (Rupees Ten Thousand Only) is payable to either the immediate dependents or to the responsible person who shall be performing last rites from the first day of entering into the insurable employment.
  • Vocational Rehabilitation to the insured worker: This benefit is provided to insured worker who are permanently disabled and are undergoing Vocational Rehabilitation Training at VRS.
  • Physical Rehabilitation of insured workers: this benefit id given in the event of any physical disablement which occurs due to employment injury during its term.
  • Medical and Health Care during Old Age: This form of benefit is given to Insured worker retiring on attainment of the age of superannuation or under VRS/ERS. It also applies to a person who is forced to leave their service due to any permanent disability of an insured worker and the spouse of the insured worker. However, he/she must pay a token amount of Rs. 120/- (Rupees One Hundred and Twenty Only) per annum for such benefit.
  • Rajiv Gandhi Shramik Kalyan Yojana: This scheme (Yojna) is formulated for aiding in Unemployment allowance. • Rajiv Gandhi Shramik Kalyan Yojana was introduced w.e.f. 01st April 2005. An Insured worker under the ESI Scheme who becomes unemployed after being insured for minimum three or more years, in event of closure of the establishment or the factory, retrenchment or permanent invalidity are entitled to the following allowances:
  1. An Unemployment Allowance which is equal to 50% (Fifty Percent) of the total wage for a period of maximum of one year.
  2. Medical and Health care for the insured worker and the immediate family members from the Hospitals or Dispensaries established under the ESI Scheme during the term IP receives unemployment allowance.
  3. Vocational Rehabilitation Training shall be given for upgrading the skills –
  4. Incentive to employers in the Private Sector for providing regular employment to the persons with disability :
  5. A Minimum wage limit for Physically Disabled Persons for availing the ESIC Benefits under the scheme is Indian Rs. 25,000/- (Rupees Twenty Five Thousand Only).
  6. An Employers’ contribution which shall be payable by the Central Government of India for a term of 3(Three) years.

Conclusion

The work of an HR Manager is vital in smooth functioning of any company or a corporate establishment. Only a company with happy workers and Employees can reach the heights of success the government of India continuously strive hard to bring benefits to the workers of India and bring their skills to the optimum level. The ESIC is one such step towards it. Such insurance benefits brings confidence in workers with lower wages. However, it is not possible for every worker to know their rights under the law of India. Here comes the work of the Human Resource Managers. They must efficiently make aware the worker of their rights of insurance benefits, in case of any mishaps or accident.
References

References

[1] BibleHR.com. what is ESIC? ESIC FAQ. Retrieved 1 January 2016

[2] K.M.Pillai. Labour & Industrial Laws (Fourteenth Edition, 2012 ed.). Allahabad Law Agency. ISBN 81-89530-71-2

[3] C M Abraham. Sociology for Nurses: A Textbook for Nurses and Other Medical Practitioners.

[4] Ibid.

[5] “Employee State Insurance: For a handful of contribution, a bagful of benefits24 February 2011

[6] Annual Report 2008-2009″,  Employees’ State Insurance Corporation

[7] Rule 51, The Employee State Insurance Act, 1948

[8] Ken Robinson, TED Talk

[9] Cambridge Dictionary

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