Employees State Insurance Corporation

Employees’ State Insurance Corporation (ESIC): A Complete Guide

“To provide good quality and efficient cashless health-care services to Insured Persons and their Families.” — ESI-PGIMSR & ESIC Medical College Joka (Institutional Statement), Government medical college under ESIC

Employees’ State Insurance Corporation (ESIC) is a statutory corporate body under the administrative control of the Ministry of Labor and Employment, Government of India. Established on February 24, 1952, it manages the Employees’ State Insurance (ESI) scheme according to rules and regulations stipulated in the ESI Act of 1948. The organization serves as one of India’s two main statutory social security bodies, with the Employees’ Provident Fund Organization being the other.

The ESI Act of 1948 represents the first major social security legislation for workers in independent India. This pioneering initiative emerged when the country’s industrial sector was still developing, demonstrating India’s early commitment to organized worker protection through statutory provisions. 

The scheme addresses health-related contingencies that workers typically face, including sickness, maternity, temporary or permanent disablement, occupational diseases, and employment-related injuries that may result in partial or total loss of wages or earning capacity.

Prime Minister Jawaharlal Nehru inaugurated the ESI scheme in Kanpur on February 24, 1952, at Brijender Swarup Park before a gathering of 70,000 people. The scheme launched simultaneously in Delhi, with an initial coverage of 120,000 employees across both center.. Notably, Jawaharlal Nehru became the first honorary insured person of the scheme.

Administratively, ESIC is headed by the Union Minister of Labor as its Chairman, with a Director General appointed by the Central Government serving as the Chief Executive Officer. The organization divides its operations into five zones across India, each headed by Zonal Medical Commissioner and Zonal Insurance Commissioner. Each state has a Regional Office generally headed by an additional commissioner or Director rank officer, with further subdivisions into Sub-Regional offices covering several districts.

The ESI scheme applies to factories and other establishments including road transport, hotels, restaurants, cinemas, newspapers, shops, and educational/medical institutions employing 10 or more persons. However, some states maintain a threshold of 20 employees for coverage. The scheme currently covers workers earning up to Rs. 21,000 per month, with a higher limit of Rs. 25,000 for persons with disabilities.

Since its modest beginning at just two industrial centers in 1952, the ESI scheme has expanded significantly. Currently, it operates in over 843 centers across 33 states and union territories. The scheme applies to approximately 7.83 lakh factories and establishments throughout India, benefiting about 2.13 crore insured persons and their families, with total beneficiaries exceeding 8.28 crores.

The ESIC logo—a lighted lamp—symbolizes the spirit of the scheme, bringing hope to countless worker families and providing assistance during physical and financial distress[10]. The organization’s growth and development owe much to the commitment and vision of pioneers like Prof. B.P. Adarkar, who submitted the first “Report on Health Insurance” to the Tripartite Labor Conference in 1944, and Dr. C.L. Katial, who served as the first Director General from 1948 to 1953.

Who is eligible under the Employees’ State Insurance Scheme?

The Employees’ State Insurance Scheme eligibility is determined based on specific criteria related to employment status, wage limits, and establishment type. The scheme primarily targets employees in the organized sector who need socio-economic protection against various contingencies.

Eligibility under the ESI Scheme applies to individuals who are employed in covered establishments and whose monthly wages do not exceed Rs. 21,000. For persons with disabilities, this wage ceiling is higher at Rs. 25,000 per month. Notably, there is no age limit for coverage under the scheme.

The ESI Act mandates coverage for all non-seasonal factories employing 10 or more persons. Additionally, the scheme extends to various other establishments including:

• Shops and commercial establishments
• Hotels and restaurants
• Cinemas including preview theaters
• Road motor transport undertakings
• Newspaper establishments
• Private medical and educational institutions
• Contract and casual employees of Municipal Corporations/Bodies

In certain states, the threshold for coverage remains at 20 employees rather than 10[20]. Furthermore, the Central Government has expanded coverage to specific establishments employing 20 or more persons, including:

• Insurance businesses
• Non-Banking Financial Companies (NBFCs)
• Port trusts
• Airport authorities
• Warehousing establishments

Once a factory or establishment falls under the ESI Act’s coverage, it continues to remain covered regardless of whether the number of employees subsequently falls below the required limit. Likewise, any change in manufacturing activity does not affect the coverage status.

For employees, an important aspect to understand is that even if they cross the prescribed wage ceiling in any month after the commencement of a contribution period, they continue to be considered eligible until the end of that contribution period. This ensures continuity of benefits despite temporary fluctuations in income.

Exemptions from the ESI scheme are permissible only when employees in a covered establishment already receive benefits that are substantially similar or superior to those provided under the ESI Act. This provision prevents duplication of benefits while ensuring adequate social security coverage.

The geographical scope of the ESI Scheme now encompasses 668 districts across 36 states and union territories in India. This includes 565 fully notified districts and 103 partially notified districts where the scheme operates in district headquarters areas and prominent industrial centers. Nevertheless, the scheme remains to be implemented in 135 districts across the country.

Apart from the standard benefits, the scheme also offers specialized programs for eligible members. These include the Rajiv Gandhi Shramik Kalyan Yojana, which provides unemployment allowance equal to 50% of wages for up to two years to insured persons who become unemployed after being insured for two or more years. Likewise, the Atal Beemit Vyakti Kalyan Yojana (ABVKY) offers relief payments for up to 90 days (once in a lifetime) at 50% of wages to eligible insured persons.

How does the ESIC contribution system work?

The ESIC contribution system operates through a shared financial model where both employers and employees make percentage-based contributions calculated on monthly wages. This self-financed fund is governed by the Employees’ State Insurance Corporation according to the provisions specified in the ESI Act, 1948.

Employee contribution rate

The employee contribution rate currently stands at 0.75% of the wages paid or payable. This rate was revised effective from July 1, 2019, marking a reduction from previous contribution levels. For instance, an employee earning wages of Rs. 20,000 per month would contribute Rs. 150 (0.75% of Rs. 20,000) toward the ESI scheme.

The employee’s contribution is deducted directly from their wages by the employer each month. Importantly, employees whose daily average wage does not exceed Rs. 176 are exempted from making their share of contribution to the scheme. Nonetheless, they remain covered under the scheme and eligible for all benefits.

Employer contribution rate

Employers are required to contribute 3.25% of the wages paidor payable to their employees. This rate, like the employee rate, was revised effective from July 1, 2019. Continuing with the previous example, for an employee earning Rs. 20,000 per month, the employer would contribute Rs. 650 (3.25% of Rs. 20,000).

Beyond making their own contributions, employers must also fulfill additional responsibilities within the system. They must deduct the employee’s contribution from the wages bill and deposit both contributions (employer’s and employee’s) with the ESIC within 15 days of the last day of the calendar month in which the contributions fall due. Moreover, employers must contribute their share even for employees earning daily wages up to Rs. 176 who are exempted from their own contributions.

Wage limits and exemptions

The ESI scheme applies a wage ceiling of Rs. 21,000 per month. Employees earning more than this amount are exempted from ESI contributions. However, there is a special provision for persons with disabilities, who remain covered under the scheme up to a monthly wage of Rs. 25,000.

“Wages” under the ESI Act refer to the total amount received by an employee in exchange for services provided, including basic salary and allowances. Specific components included in wage calculation are basic pay, dearness allowance, house rent allowance, city compensatory allowance, medical allowance, and other special allowances. Following a Supreme Court order dated March 8, 2021, conveyance allowance or travel allowance does not fall under the definition of ESI wages.

The ESI Act establishes two contribution periods annually, each lasting six months, with corresponding benefit periods:

• Contribution period: April 1 to September 30 | Benefit period: January 1 to June 30 of the following year
• Contribution period: October 1 to March 31 | Benefit period: July 1 to December 31

This system ensures continued coverage even when an employee’s wages increase beyond the threshold during a contribution period. For example, if an employee’s wages increase from Rs. 18,000 to Rs. 22,000 in July 2020, deductions continue until September 2020 (end of contribution period), and benefits remain available until June 30 of the following year.

The total ESI contribution for each employee equals the sum of the employer’s and employee’s contributions. For 2023-24, these contribution rates remain unchanged from the July 2019 revision.

What are the benefits provided by ESIC?

“Ensure equitable distribution of tertiary health-care services to Insured Persons and their Families.” — ESI-PGIMSR & ESIC Medical College Joka (Institutional Statement), Government medical college under ESIC

Section 46 of the ESI Act establishes six primary social security benefits that form the cornerstone of the ESIC welfare system. These benefits provide comprehensive protection to insured persons and their families across various life situations and contingencies.

Sickness benefit

Sickness benefit provides cash compensation at 70% of average daily wages during periods of certified sickness for a maximum of 91 days in a year. To qualify, an insured person must have contributed for at least 78 days in the corresponding six-month contribution period. The benefit is not payable for the first two days of sickness (waiting period) except when a spell commences within 15 days of an earlier spell for which benefit was paid. Extended Sickness Benefit (ESB) is available at an enhanced rate of 80% of wages for up to two years for 34 specified long-term diseases.

Disablement benefit

Temporary Disablement Benefit (TDB) is payable at approximately 90% of daily wages as long as the disability continues. It is available from the first day of entering insurable employment, regardless of previous contributions, in cases of employment injury. Permanent Disablement Benefit (PDB) is paid at 90% of wages as a monthly payment based on the extent of earning capacity loss certified by a Medical Board. For permanent disabilities assessed as final with rates not exceeding Rs.10 per day, commutation into a lump sum is possible under certain conditions.

Maternity benefit

Maternity benefit equals 100% of average daily wages. It is payable for up to 26 weeks for the first two surviving children, with no more than 8 weeks preceding the expected confinement date. For women with two or more surviving children, the benefit duration reduces to 12 weeks. Commissioning or adopting mothers receive 12 weeks of benefit from the date the child is handed over. Miscarriage or medical termination of pregnancy entitles 6 weeks of benefit.

Medical benefit

ESIC provides full medical care to insured persons and their families, including medical attendance, treatment, drugs, specialist consultation, and hospitalization. There is no ceiling on treatment expenditure. This benefit is available from the first day of entering insurable employment.

Dependents’ benefit

Dependents’ benefit is payable when an insured person dies due to employment injury or occupational hazards. It is paid at 90% of wages as a monthly payment to eligible dependents. The minimum rate effective from March 2012 is Rs.1,200 monthly, subject to periodic revisions.

Funeral and confinement expenses

An amount of Rs.15,000 is payable for funeral expenses to dependents or the person who performs the last rites. Confinement expenses are available to insured women or to insured persons for their wives when confinement occurs where necessary medical facilities under the ESI Scheme are unavailable.

Rehabilitation support

ESIC provides physical rehabilitation in cases of physical disablement due to employment injury. This includes artificial limbs and aids. Vocational rehabilitation is offered to permanently disabled insured persons for undergoing training at vocational rehabilitation centers. For workplace injury-related physical disability, ESIC ensures 100% of average daily wages during rehabilitation.

Old age medical care

Retired and permanently disabled insured persons and their spouses can continue receiving medical care on payment of a token annual premium of Rs.120 [63]. This ensures continued health protection even after active employment ceases.

How to register for ESIC as an employer?

Registration with the Employees’ State Insurance Corporation (ESIC) is mandatory for all employers whose establishments fall under the purview of the ESI Act. The entire registration process has transitioned from manual to fully online, streamlining compliance for employers across India.

Step-by-step online registration process

The online registration process begins by accessing the official ESIC portal. Employers must first create an account by clicking on the ‘Employer Login’ option followed by the ‘Sign Up’ button. Upon submission of the signup form, a confirmation email containing login credentials is sent to the registered email address.

After logging in, employers select the ‘New Employer Registration’ option and choose the appropriate ‘Type of Unit’. The system then generates Employer Registration Form-1, where comprehensive details about the establishment, employer, and employees must be entered.

Once Form-1 is submitted, employers are prompted to pay an advance contribution. The payment can be made online through the payment gateway, selecting the preferred mode of payment. After successful payment, the system generates a Registration Letter (C-11) containing a 17-digit Registration Number, which serves as valid proof of registration.

Timeline and compliance requirements

The ESI Act mandates employer registration within 15 days after the Act becomes applicable to their establishment. Upon registration, employers must obtain an Employer’s Code Number, which should be used in all ESIC forms, documents, and correspondence.

Each employee must be registered within 10 days of their appointment date. After generation of the 17-digit Employer’s Code Number, requisite documents must be submitted to the Regional Office or Sub-Regional Office (RO/SRO).

Post-registration compliance includes paying ESI contributions (employer’s share at 4.75%and employee’s share at 1.75% of wages) within 21 days of the following month in which wages fall due. Additionally, employers must maintain several records:

• Attendance register
• Complete register of wages for workers
• Inspection book
• Register documenting workplace accidents

Monthly returns and challans must be filed by the 15th of the succeeding month, whereas ESI returns must be filed half-yearly.

How to claim ESIC benefits and use the Pehchan card?

The ESIC Pehchan Card serves as the essential health card for beneficiaries under the Employees’ State Insurance Corporation scheme. This magnetic smart card stores all medical information related to insured persons, facilitating quick access to healthcare services.

Using the ESIC card at hospitals

The Pehchan Card enables insured persons and their dependents to access medical facilities at all ESIC network dispensaries and hospitals across India. Carrying the physical card is always recommended for quick and efficient service. First and foremost, the card must be presented at the hospital reception for verification. The card remains valid even when the insured person changes employment. Presently, family members can use the card at ESIC facilities even when residing in different towns.

Filing claim forms and documents

For claiming benefits, insured persons must submit properly completed claim forms with supporting documentation. In fact, certificates can be submitted manually by uploading scanned images of issued documents. The biometric authentication feature of the ESIC card reduces duplicity and ensures transparency during the claim process. Above all, the card helps track the complete medical treatment history of the insured person.

Tracking claim status

The ESIC provides online services through various platforms to track claim status. Particularly, insured persons can monitor their claim status through the official ESIC portal. The UMANG app offers additional services including downloading the Health Passbook and e-Pehchan Card. Consequently, these digital tools record approximately 2.25 lakh visits within a 30-day period.

Key Takeaways

Understanding ESIC is crucial for employers and employees in India’s organized sector, as it provides comprehensive social security coverage through a mandatory contribution-based system.

• ESIC covers establishments with 10+ employees earning up to Rs. 21,000 monthly, providing healthcare and cash benefits
•  Employers contribute 3.25% while employees contribute 0.75% of wages, with contributions due within 15 days monthly
• Benefits include 70% wages during sickness, 100% maternity benefits, full medical care, and disability compensation
• Employers must register online within 15 days of coverage applicability and maintain detailed employee records
• The Pehchan Card enables cashless treatment at ESIC hospitals nationwide with online claim tracking available

ESIC represents India’s pioneering social security initiative, transforming from covering 120,000 employees in 1952 to over 8.28 crore beneficiaries today across 843 centers nationwide.

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