This document summarizes the key aspects of the Employees' State Insurance Act, 1948 in India. It outlines the applicability of the Act to factories and establishments based on employee count. It describes the advantages for employers in being exempted from other acts. It explains the procedures for employee and family coverage, contributions by employers and employees, benefits provided like sickness, maternity, disablement benefits and more. It also describes registers, returns and forms to be maintained and penalties for non-compliance.

1. Employees’ State Insurance Act, 1948
Prepared by
Janardan Raccha

2. ESI Act
 Applicability
 Advantages for employers
 Coverage - Procedure
 Individual / Family Coverage
 Contributions
 Registers / Returns / Forms
 Forms
 Inspection Requirements
 Benefits
 Wages
 Clarifications
 Donts ( Punishment )

3. Applicability
 Preamble
 Applies to Non-seasonal factories using power in the
manufacturing process and employing 10 or more persons
 Applies to non-power using factories or establishments
employing 20 or more persons
 Implemented area wise by stages
 Appropriate Government is empowered to extend – Sec 1 (5)
 Thus extended to Shops, Hotels, Restaurants, etc.
 Factories and Establishments are to be registered

4. Advantage to employers
 Employers exempted from Maternity Benefit Act
 Employers exempted from WC Act
 Employers are absolved of providing medical facilities
 Employers have, a productive, well secured workforce
 Any sum paid by way of contribution under the ESI Act is
deducted in computing ‘income’ under IT Act

5. Coverage - Procedure
 Form 01 is to be submitted within 15 days
 A factory or establishment once covered will continue to be
covered
 Allotment of sub-code number
 Form 01A to be submitted every year before 31st Jan
 Form 1 ( declaration form ) is to be submitted along with
Form 3 ( return ) within 10 days
 ESIC 86 – Certificate of employment issued to IP by the
employer

6. Procedure for coverage of an employee
 Particulars in the form are legible and properly filled
 Details of family are indicated
 Particulars of ‘nominee’ are necessarily given
 Declaration forms of females are stamped ‘Female’
 Declaration forms must be counter-signed by employer
 Must be submitted along with Form 3 within 10 days
 Two postcard size family photographs are enclosed

7. Individual / Family Coverage
 Employees drawing Rs 10000/- pm or less are to be covered
 Contract Labour is also to be included
 Casual employees are to be covered
 Director of a company – to be covered
 Part-time workers covered
 Apprentices under the Apprentices Act are not covered
 Form 1A – Registration of family
 Form 2 – Registration of changes in the family

8. Contribution
 Employer’s contribution : 4.75 %
 Employee’s contribution : 1.75 %
 The Principal Employer has to pay both the contributions in
the first instance
 Employees earning a wage of Rs 70 or less per day are
exempted from making employees’ contribution
 Time limit for remittance : 21 days
 Contribution for arrears – need not be paid
 Contribution to be rounded off to the next higher rupee

9. Registers / Returns / Forms
 Register of Wages ( Form 6 )
 Return of contributions ( Form 5 ) – within 42 days – in
quadruplicate
 Accident Register ( Form 11 )
 Accident Form ( Form 12 ) – within 24 hours
 Inspection Register

10. Forms
 Form 28 – Abstention verification
 ESIC 37 – Certificate of Re-employment / continuing
employment
 ESIC 53 – Application for change in BO / Dispensary
 ESIC 72 – Application for duplicate identity card
 ESIC 105 – Certificate of entitlement for medical treatment

11. Inspection Requirement
 Attendance Register / Muster roll ( including CLs )
 Wages Register
 Cash Book / Bank Book
 Account Books ( including ledgers and vouchers, Balance
Sheet )
 Register of employees
 Accident Book
 Return of Contribution
 Return of Declaration Forms
 Copies of Challans
 Inspection Book

12. Sickness Benefit
 For self
 Contribution for 78 days in the corresponding CP
 Standard Benefit Rate ( Roughly 50% of daily wages )
 Max period of sickness benefit – 91 days

13. Extended Sickness Benefit
 For Self
 34 diseases listed
 Continuous employment for 2 years and contribution for 156
days in 4 preceding CPs
 40% more than SBR
 ESB is payable for 309 days over and above 91 days of ( SB )
: Total – 400 days

14. Enhanced Sickness Benefit
 For Self
 For Vasectomy / Tubectomy
 Contributory Condition : Same as Sickness Benefit
 Double the SBR ( Not less than the daily wage )
 Max : 7 days for vasectomy and 14 days for tubectomy

15. Disablement Benefit
 For Self
 No ‘contributory conditions’
 For temporary disablement, till it lasts
 For permanent disablement, for life
 70% of wages for TDB
 Proportionate to loss of earning capacity in case of
permanent disablement

16. Dependent Benefit
 For dependents in case of death
 No ‘contributory conditions’
 Eligible dependents : Widow/s, legitimate or adopted
son/daughter till 18 years of age / till marriage ( daughter )
 Proportionate rate based on 70% of wages

17. Maternity Benefit
 For Self
 Contribution for 70 days in two preceding consecutive CPs
 12 weeks in case of normal delivery
 6 weeks for miscarriage
 16 weeks for pregnancy based sickness
 Full wages ( appro. )

18. Funeral Expenses
 To a person who performs the last rites of an IP
 No ‘contributory condition’
 A lump sum of Rs 2500.
 Payable to eldest surviving member of the family ( who
incurs the expenditure on the funeral )

19. To be deemed as wages ( illustrative list ):
Basic Production incentive
DA Bonus other than statutory Bonus
HRA Meal / Food allowance
CCA Suspension allowance
OT Lay off compensation
NSA Children Education allowance

20. Not to be deemed as wages ( illustrative list ):
Contribution by employer for PF / ESI
Sum paid to defray special expenses
Gratuity
Encashment of Leave
Washing Allowance
Benefits paid under ESI scheme
Payment of Inam which does not form part of contract of emp.
Reimbursement of conveyance exp. for duty related journey

21. Aids to record keeping – Rubber Stamps
 About 1” size with employer’s code no.
 Name and Designation of the officer who is to counter sign
 Name, Address and Code No. of the employer
 A rubber stamp with the word ‘Female’

22. Clarifications
 Partner of a firm need not be covered
 Professional Consultants need not be covered
 Insurance premium subsidy will be ‘wages’
 Non-payment of contributions due to non-availability of
finance
 Contributions payable even if the benefit is not received
 Contracting out is not possible
 Dismissal not possible during sickness

23. Clarifications
 OT is considered for contribution purpose and not for
coverage
 Employee to be covered does not have the right to opt out
 Establishments can seek exemption but it is not done now-a-days
 Bifurcation of total contract amount
 Contribution period : 1st Apr – 30th Sep & 1st Oct – 31st Mar
 Benefit period : 1st Jan – 30th Jun & 1st Jul – 31st Dec

24. Clarifications
 Applicability to Hospitals
 A Hotel will be a factory under ESI Act
 Notional extension of manufacturing process ( service at
customer’s place )
 A club is to be covered
 Manufacturing Process will include tailoring and garment
manufacturing
 There must be 20 eligible employees ( ESIC Vs M M Suri &
Associates 1998 LLR 1105 SC )
 Different sales and service outlets will be clubbed together
 Functional integrality

25. Don'ts
 Failure to pay the contributions
 Deduction of Employer’s contribution from employees
 Reduction in wages
 Termination during sickness
 Failure to submit return
 Obstructing the inspector
 All the above warrant imprisonment and fine
 For delay in paying the contributions, interest and damages
will be levied

26. Interest and Damages
 Rate of interest is 12% for delayed payment
 Rate of damages is 5% for less than 2 months
 10% for 2 to 4 months
 15% for 4 to 6 months
 25% for 6 months and above