By Ganga J Shankar
The International Labour Organisation (1942) defines social security as “the security that society furnishes, through appropriate organisations, against certain risks to which its members are exposed. These risks are essentially contingencies against which the individual of small means and meagre resources cannot effectively provide by his own ability or foresight alone, or even in private combination with his fellows these risks being sickness, maternity, invalidity, old age and death. It is the characteristic of these contingencies that they imperil the ability of the working man to support himself and his dependents in health and decency.”
Social security is an important welfare measure for working class. It helps labourers at the time of their illness, accidents, invalidity and other hardships of life. To run the social security and labour welfare schemes efficient machinery is needed because without any effective administrative set-up it is very hard to run all these schemes. It can be said that non institutional measures of social security were working since time immemorial. They are in fact the backbone of present social security programmes and schemes. Such measures had been provided by joint families, community, creed, caste panchayats, orphan ages, widow homes and religious institutions. Then in 19th century industrialization started in India and this modern industrialization developed a new class of industrial proletariat[1]. Due to the start of industries, new problems arose and with the growth of modern factory system, various safety and health problems raised a demand for institutionalization of protection measures. Union activities increased to pressurized government to enact some social security legislations.
The Workmen’s State Insurance Bill was introduced in the Central Legislative Assembly towards the end of 1945 and eventually passed as the Employees’ State Insurance Act (ESI Act) in March 1948. Neither the various Maternity Benefit Acts nor the workmen compensation Act introduced the principle of social insurance in India. Until the late thirties, the environment was considered unfavourable for the introduction of any of the more complex forms of provision for social security, such as health and unemployment insurance. During the 1940s however, there has been a marked change in the official as well as public opinion as regards the feasibility of making a beginning in the field of social insurance. The ESI Act,1948 which received the assent of the Governor General of India on 19 april,1948 marks the first attempt to introduce an integrated system of health, maternity and accident insurance.[2]
It was to provide workers in perennial factories with more than ten employees with eight weeks of paid sick leave, monetary benefits in case of maternity, accident and invalidity, as well as medical benefits to be offered by special medical services that were to be created for the purpose.[3]. The law remained a dead letter for several years, however. It was observed a year after the passing of the Act that while the ESI depended on the close cooperation of the Central Government, the Provincial Governments and of employers, “all the three are too preoccupied with their own problems to attend to the teething troubles of a child whom none consider as their own”.[4] The main reason for the delay in implementation was that in 1951, the All-India Organisation of Industrial Employers, a body representing Indian big business, considered the scheme “socially unjust” and even “disastrous” in its economic consequences, as it imposed “on industry a burden which it cannot bear”. In 1952, Jawaharlal Nehru finally inaugurated a pilot scheme that was confined, however, to Delhi and the industrial city of Kanpur.[5] A full decade after the ESI Act had been passed by the Parliament of independent India, a “Study Group on Social Security” set up by the Ministry of Labour believed that of 2.2 million factory workers to which the law extended, a mere 1.3 million were actually covered by the mechanisms of implementation established by then (Study Group on Social Security 1958). The act introduced an integrated social insurance scheme covering health,
maternity and accident insurance. The scheme was introduced as a compulsory state insurance scheme for the benefit of the workers working in Indian industries.
Main provisions of the ActSection 2A of the Act and Regulation 10-B states the employer's legal responsibility to register their factory/ establishment under the ESI Act within 15 days of its applicability to them. The ESI Scheme is a self-funding program. Employer and employee contributions are primarily used to support the ESI funds, which are provided monthly at a fixed percentage of salaries received, company contributes 3.25 percent, the employee earning Rs 21,000 or less per month in salary contributes 0.75 percent for a total share of 4 percent. State governments are also responsible for 1/8th of the cost of medical benefits.
Contribution periods
Contribution periods and the corresponding benefit periods shall be as under: [6]
Contribution period | Corresponding benefit period |
1st April to 30th September | 1st January of the year following to 30th June |
1st October to 31st March of the year following. | 1st July to 31st September. |
The section 46 of the Act envisages six social security benefits:
Medical Benefit [7]: From the moment an insured person starts insurable employment, he and his 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)[8] : 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.
Maternity Benefit (MB)[9] : 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[10]: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.
Dependants Benefit(DB)[11]: DB paid to the dependants of a deceased Insured person in the form of a monthly payment at a rate of 90% of wage in circumstances where death occurs due to a job injury or occupational hazard.Other Benefits :1. Funeral Expenses: From the first day of insurable work, a sum of Rs.15,000/- is payable to dependents or the person performing final rites.2. Confinement Expenses: An insured woman or an I.P. in respect of his wife in the event of confinement in a location where appropriate medical services are not accessible under the ESI Scheme.
Significance
The Employees’ State Insurance Scheme provides need-based social security benefits to insured workers in the organized sector. ESIC has taken up the daunting task of tailoring different benefit schemes for the needs of different worker groups. The scheme, which was first introduced at two centres in 1952 with initial coverage of 1.20 lakh workers, today covers 1.55 crore workers in about 790 centres in the country. It benefits about 6.02 crore beneficiaries including the family workers of the insured persons, across the country. The scheme is being gradually used to cover new centres and steps are being taken for the creation of requisite infrastructure for providing medical care to a larger number of insured persons and their families. While the cash benefits under the scheme are administered through a network of about 799 Branch offices and pay offices, medical care is provided through 150 ESI Hospitals, 42 ESI Annexes, 1403/93 ESI Dispensaries / ISM Units and 1447 Clinics of Insurance Medical Practitioners. The total number of medical officers under the Scheme is about 6536.[12]
ADMINISTRATION
The administration of the scheme of insurance contained in the Act is vested in the Employees’ State Insurance Corporation created under the Act. The corporation is a body corporate having perpetual succession and a common seal. It can sue and be sued by its name.
Members:
According to the Act, the corporation consists of the following members;
A chairman to be nominated by the Central Government ;
A vice – Chairman to be nominated by the Central government;
Not more than five people to be nominated by the Central Government ;
One person each representing each of the states in which this act is in force to be nominated by the central government;
One person to be nominated by the central government to represent the Union territories;
Five-person representing employers to be nominated by the central government in consultation with such organization of employees as may be recognized for the purpose by the central government;
Three members of Parliament of whom two shall be members of the Loksabha and one shall be a member of the Rajya Sabha elected respectively by the two houses;
The Director-General of the corporation, ex – officio;
The term of office of members is ordinarily four years but nominated member holds office during the pleasure of the government nominating them.
Penalties under the Act
Section85: Punishment for failure to pay contributions, etc: if the employer fails to pay contribution which he is liable to pay, he shall be punished with imprisonment which may not be less than one year which may extend to 3 years, and fine of Rs 10000.
If the employer deducts or attempts to deduct from the wages of the employee, whole or part of employer’s contribution, or in contravention of s.72 reduces the wages or privileges admissible to employee or in contravention to s.73 or any other regulations dismisses, discharges, reduces or otherwise punishes an employee punished with imprisonment which may extend to 4 years or a fine of 4000rs or both.
Case laws
Kumbakonam Milk Supply Cooperative Society v. Regional Director , ESIC Madras[13] - Employees State Insurance Act, being a welfare legislation, the courts should give liberal interpretation to its provisions which are beneficial to the employees.
Employees State Insurance Corporation, Sub Regional office, Hubli v. APS Star Industries Ltd, Dharwad [14]- Timely payment of ESI’s contributions is the responsibility of the employer and does not depend upon actual disbursement of wages and as such an employer cannot escape its obligation by taking the plea that the company has become sick and the scheme for its rehabilation has been sanctioned by BIFR
Regal Steel Works v. Employees State Insurance Corporation [15]- employees state insurance authorities are empowered to make comprehensive record inspection to determine liability for contributions.
Bharagath Engineering v. R.Ranganayaki [16]- Non payment of contributions will not affect the availing of ESI benefits by an employee.
P B Krishnankutty Nair V. Regional Director, Employees state insurance corporation,[17]- ESIC will not be liable to pay compensation for injuries suffered by the employee having crossed salary ceiling.
Regional Director, Employees State Insurance Corporation v. Anandha silks paradise[18]- in this case it was held that High Court will not interfere in fact findings of Insurance Court.
H N Pareek & co. Jamsedhpur v. State of Jharkhand[19]- ESI contributions cannot be claimed from an employer when an application for grant of exemption is pending.
Employees state insurance corporation v. Krishanveni Hatmag Vinkar Sahakari society ltd [20]- Members of the society, taking yarn beams, preparing and supplying back the finished goods will be covered under ESI.
Conclusion
Employees’ State Insurance Scheme has to enhance their services to meet the challenges and demands of the changing environment. The essence of this scheme is beneficiaries’ satisfaction and also the awareness about this act to the employees is essential in today’s world. They constitute an important step towards the goal of a welfare state, by improving the living and working conditions and guarding people against the uncertainties of the future.
The author of this article is Ganga J Shankar, an LLM student at His Highness Maharajas Govt Law College, Kochi.
[1] Asha.G , Employee Satisfaction and ESI Benefits among Public Sector Textile Workers in Kerala, 2017 , International Journal of Current Engineering and Scientific Research (IJCESR)
[2] ‘’A decade of labour legislation in india,1937-1938’’ part 2( May 1949) vol 59, International Labor Review506 https://heinonline.org
[3] Ravi Ahuja , “Minoritarian Labour Welfare in India: The Case of the Employees’ State Insurance Act of 1948”(july 27,2020) PubMed Central, National Library of Medicine.
[4] “Employees’ State Insurance Corporation”, Times of India , 30 August 1949, p. 11.
[5] International Labour Organisation, report 2/1952, pp. 94f , The Statesman and National Herald,( 25 February 1952).
[6] Employees’ State Insurance, General Regulations,1950 Regulation 4
[7] Employees’ State Insurance Act, 1948 (Act 34 of 1948)s.56
[8] Employees’ State Insurance Act, 1948 (Act 34 of 1948)s. 46
[9] Employees’ State Insurance Act, 1948 (Act 34 of 1948)s.50
[10]Employees’ State Insurance Act, 1948 (Act 34 of 1948)s.51
[11] Employees’ State Insurance Act, 1948 (Act 34 of 1948)s.52
[12] Deepak Goyal, “Employees State Insurance Act 1948 Overview”, available at https://indianlegalsolution.com/author/raghvendra123( last visited on Aug.21,2023)
[13] (2003) 2CLR 738
[14] (2003) 4 Kant LJ 297
[15] (2002) 2 LLJ 45
[16] (2003) 2 SCC 138
[17] (2008) LLR 768 (SC)
[18] (2008) LLR 1243 (Mad HC)
[19] 2007 LLR 635 (Jharkhand HC)
[20] 2007 LLR 288(Bombay HC)
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