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what-is-esi-contribution-and-its-benefit

 

What is ESI contribution and its benefit?

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Introduction-

Employee State Insurance managed by the Employee State Insurance Corporation which is an autonomous body created by the law under the Ministry of Labour and Employment, The Employees State Insurance act provides benefits to employees in case of sickness, maternity, injury and any accident occurred during employment. Under this scheme, the workers are provided with a huge variety of medical, monetary and other benefits by the employer.

 

Applicability-

  1. All factories and establishments in which 10 or more persons are employed.
  2. Shops
  3. Restaurants or Hotels
  4. Road Motor transport establishments
  5. News paper establishments
  6. Private educational institutions
  7. Agricultural or otherwise

The wage limit for coverage under the Act is Rs.21, 000/- per month. However the threshold for Coverage of establishments is still 20 Employees in Maharashtra and Chandigarh.


Contribution to ESI-
  • Employer’s contribution- Employer’s contribution is 4.75% of wages.
  • Employee’s contribution- Employee’s contribution is 1.75% of wages.

Benefits to Employees-

There are various benefits that an insured employee and their dependents are entitled to be as under-
  • Sickness benefit- Sickness Benefit in the form of cash compensation at the rate of 70 per cent of wages is payable to insured workers during the periods of certified sickness for a maximum of 91 days in a year. In order to qualify for sickness benefit the insured worker is required to contribute for 78 days in a contribution period of 6 months.
    • Extended Sickness Benefit (ESB) : SB extendable up to two years in the case of worker suffering from malignant and long-term diseases at an enhanced rate of 80 per cent of wages.
    • Enhanced Sickness Benefit : Enhanced Sickness Benefit equal to full wage is payable to insured persons undergoing sterilization for 7 days/14 days for male and female workers respectively.
  • Medical benefit- Full medical care is provided to an Insured person and his family members from the day he enters insurable employment. There is no ceiling on expenditure on the treatment of an Insured Person or his family member. Medical care is also provided to retired and permanently disabled insured persons and their spouses on payment of a token annual premium of Rs.120/-
  • Maternity benefit  Maternity Benefit for confinement/pregnancy is payable for Twenty Six (26) weeks, which is extendable by further one month on medical advice at the rate of full wage subject to contribution for 70 days in the preceding year.
  • Disablement benefit
    • Temporary disablement benefit (TDB): 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.
    • Permanent disablement benefit (PDB) : 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.
  • Dependents benefit- Dependents Benefits paid at the rate of 90% of wage in the form of monthly payment to the dependants of a deceased Insured person in cases where death occurs due to employment injury or occupational hazards.
  • Funeral expenses- An amount of Rs.10,000/- is payable to the dependents or to the person who performs last rites from day one of entering insurable employment.
There are another benefits are such as Vocational Rehabilitation or Physical Rehabilitation or Old age medical care etc.

Unemployment Allowance

Under the Rajiv Gandhi Shramik Kalyan Yojana, unemployment allowance is payable to an insured Person who become unemployed after being insured three or more years, due to closure of factory/establishment, retrenchment or permanent invalidity.  The applicable unemployment allowances provided are:

  • Unemployment Allowance equal to 50% of wage for a maximum period of up to one year.
  • Medical care for self and family from ESI Hospitals/Dispensaries during the period IP receives unemployment allowance.
  • Vocational Training provided for upgrading skills – Expenditure on fee/travelling allowance borne by ESIC.

Definition of Wages- Section 2(22) in the Employees' State Insurance Act, 1948

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 lay-off and other additional remunera­tion, if any paid at intervals not exceeding two months, but does not include—

  • Any contribution paid by the employer to any pension fund or provident fund, or under this Act;
  • Any travelling allowance or the value of any travelling concession;
  • Any sum paid to the person employed to defray special expens­es entailed on him by the nature of his employment; or
  • Any gratuity payable on discharge;
Payments consisting as wages-
  • Basic pay
  • Dearness Allowance
  • House rent allowance
  • City compensatory allowance
  • Overtime wages (but not to be taken into account for determining the coverage of an employee)
  • Production incentive
  • Bonus other than statutory bonus
  • Nightshift allowance
  • Children education allowance
  • Heat, Gas & Dust allowance
Payments consisting as wages-
  • Contribution paid by the employer to any pension fund or provident fund
  • Sum paid to defray special expenses
  • Gratuity payable on discharge
  • Benefits paid under the ESI Scheme
  • Encashment of leave Encashment
  • Payment of Inam which does mean part of employment
  • Washing allowance for livery
  • Conveyance amount towards reimbursement for duty related journey
The following persons are not to be counted under ESI Act:
  • A proprietor or a partner whether drawing salary or not;
  • A contractor lending the services of his employee;
  • An apprentice engaged under the Apprentice Act, 1961;
  • Persons employed on contract for service, e.g. legal, technical, tax consultants;
  • Persons employed in branch/sales offices etc. away from the factory premises are not to be counted for the purpose of coverage of the factory. However, they are to be covered as employees under Section 2(9), if their wages does not exceed the ceiling limit prescribed.



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