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How employees will benefit from Employees’ State Insurance scheme

Satya Sontanam BL Research Bureau | Updated on May 22, 2020 Published on May 21, 2020

Soon, the scheme’s coverage may be extended to all districts against the existing applicability in notified districts/areas only

As part of the Aatma Nirbhar Bharat Package, the Finance Minister had announced that the ESIC (Employees’ State Insurance Corporation) coverage is proposed to be extended to all districts against the existing applicability in notified districts/areas only. This will be applicable for all establishments employing 10 or more employees. The FM also recommended extension of the ESIC to establishments with less than 10 employees too, on voluntary basis. But for hazardous industries, ESIC coverage is proposed to be mandated, irrespective of the number of employees. These proposals will see the light of the day once the Bill is passed in parliament.

In establishments covered under the ESI Act, 1948, employers must contribute 3.25 per cent of the wages of the employee to the ESIC. Employees’ contribution of 0.75 per cent will also be deducted and transferred to ESIC.

Just like how insurance works, on regular contributions to ESIC, employees will be provided socio-economic protection measures including medical care against the events of sickness, disablement and death due to employment injury. In case of loss of job due to closure of the factory, unemployment allowance too will be provided. There are maternity benefits too.

Applicability

The Act is applicable to employees earning wages of up to ₹21,000 per month working in a factory carrying out manufacturing process. All factories employing 10 (20 in case of Maharashtra and Chandigarh) or more employees are covered. The wage limit is ₹25,000 in case of a person with a disability.

Here, wages include all remuneration payable to an employee. Exclusions include contributions to pension fund or provident fund, entertainment allowance, travel allowance and gratuity payable.

Not just factories, the scheme has been extended to shops, hotels, restaurants, cinemas, road-motor transport undertakings, newspaper establishments, etc. Industries to which the ESI Act is applicable is listed on the ESIC website.

As per the data available on its website, the ESI scheme is now notified in 566 districts in 34 States and Union Territories.

What’s available?

An employee covered under this Act will be called an ‘insured person’. Those covered under the scheme would get the benefits (periodical payments) in case of any sickness or if suffering from disablement as a result of an employment injury. For women employees, periodical payments will also be made in case of confinement or miscarriage or premature birth of child or sickness arising out of pregnancy. In case of the death of the insured person as a result of employment injury, the dependants will be given the specified sum insured. Expenditure towards the funeral of the deceased insured person will also be paid to his/her family.

The amount of benefits payable, for some, will be at a specified percentage of wages of an employee or a fixed amount.

Further, ESIC also provides medical benefits ― the only benefit provided in kind through the State Governments (including hospitals run by ESI Corporation) without linking the benefit to employees’ wages and contributions.

Benefits period

Once an employee is registered under the ESIC Act, the benefits under this Act will commence on expiry of the period of nine months from the date of such employment. That is, if the contribution to the ESIC started in the month for April 2020, the benefit period starts from January 2021. A contribution for six months will entitle an employee to get the above-stated benefits for six months. That is, for contribution from April to September 2020, the benefit period will be January to June 2021.

What then during the first nine months of employment? G Srinivas, Managing Partner, Brahmayya & Co., Bengaluru, says, “An employee is entitled to medical benefits from the very first day of employment for a period of three months.” Thus, in the above example, an employee will be eligible for medical benefits (not all benefits) from April to June 2020.

Srinivas also says that, if an employee continues in employment for three months or more, the person will be entitled to medical benefits till the beginning of the corresponding benefit period. Ergo, in our example, if the employee continues his/her employment beyond June 2020, medical benefits will continue till December 2020.

Here are a few provisions applicable to employees who are part of the ESIC scheme. As long as you continue the employment with an establishment covered under the ESIC scheme, you will be entitled to claim benefits under the ESI Act. Discontinuing the job does not mean that the benefits will also be terminated right then. The employee will continue to be insured till the end of the benefit period. This is especially important during these crisis times. An employee who loses his/her job during the Covid-19 period should check when his/her benefit period ends and he/she can claim the benefits till then.

But what if an employer defaulted in payment of ESI contributions? Employees will still be entitled to receive benefits under the scheme. Srinivas of Brahmayya & Co. points that, “It is the responsibility of the employer to deposit the ESI contributions. In case of failure by the employer, ESIC can recover prescribed amounts from the employer.”

Other benefits

There are other benefits too, which can come in handy during this Covid-19 crisis.

Employees covered under the Act will also be eligible for the unemployment allowance equal to 50 per cent of wages for a maximum period of up to two years under the Rajiv Gandhi Shramik Kalyan Yojana. This is in case of closure of factory/establishment, retrenchment or permanent invalidity. For this, the person should have been insured for three or more years under ESI before the unemployment. Medical care will also be provided while giving unemployment allowance.

In addition, an employee covered under ESI Act will also be eligible for benefits under the Atal Beemit Vyakti Kalyan Yojana. Under this, cash compensation can be claimed after three months of being rendered unemployed (once in a lifetime). The compensation will be for up to 90 days, provided the employee satisfies certain conditions. The compensation per day shall not exceed 25 percent of the average earning per day.

Factbox

Benefits

- Medical benefits (non-cash treatments in state-run hospitals)

- Sickness allowance

- Maternity benefits

- Payment on disablement/death due to employment injury

- Unemployment allowance

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Published on May 21, 2020
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