The Employee's State Insurance Act,1948

The Employees' State Insurance Act applies to all factories employing ten or more persons and carrying on a manufacturing process. This article discusses the basics of the act including employee benefits and employer obligations and rights. The article also discusses the dispute and appeal mechanism.

Wed Jul 20 2022 | Employment, Criminal and Labour | Comments (0)


The Employees' State Insurance Act, provides for certain benefits to employees in case of sickness, maternity and employment injury.

The Act extends to the whole of India. It applies to all factories (including Government factories but excluding seasonal factories) employing ten or more persons and carrying on a manufacturing process with the aid of power or employing 20 or more persons and carrying on a manufacturing process without the aid of power and such other establishments as the Government may specify.

A factory or other establishment to which this Act applies, shall continue to be governed by its provisions even if the number of workers employed  therein falls below the specified limit or the manufacturing process therein ceases to be carried on with the aid of power, subsequently

The Act does not apply to the following:

  1. Factories working with the aid of power wherein less than 10 persons are employed;
  2. Factories working without the aid of power wherein less than 20 persons are employed;
  3. Seasonal factories engaged exclusively in any of the following activities viz. Cotton ginning, cotton or jute pressing, decortication of groundnuts, the manufacture of coffee, indigo, lac, rubber, sugar (including gur) or tea or any manufacturing process incidental to or connected with any of the aforesaid activities, and including factories engaged for a period not exceeding seven months in a year in blending, packing or repackaging of tea or coffee, or in such other process as may be specified by the Central Government;
  4. A factory which was exempted from the provisions of the Act as being a 'seasonal factory' will not lose the benefit of the exemption on account of the amendment of the definition of 'seasonal factory';
  5. Mines subject to the Mines Act, 1952;
  6. Railway running sheds;
  7. Government factories or establishments, whose employees are in receipt of benefits similar or superior to the benefits provided under the Act and Indian naval, military or air forces.

The appropriate Government may exempt any factory or establishments or class of factories or establishments or any employee or class of employees from the provisions of this Act.

Employees Entitled

Every employee (including casual and temporary employees), whether employed directly or through a contractor, who is in receipt of wages upto Rs. 6,500 p.m. is entitled to be insured under the E.S.I. Act. However, apprentices engaged under the Apprentices Act are not entitled to the E.S.I. benefits. Coverage of part time employees under the ESI Act will depend on whether they have contract of service or contract for service with the employer. The former is covered, whereas the latter is  not covered under the E.S.I Act.

Besides, in the following cases, the employees have been held to be covered under the Act:

  1. persons employed in a canteen of a club,
  2. drivers employed by the Transport organisation,
  3. persons engaged in distribution and sale of products,
  4. persons carrying administrative work of processing the orders and executing sales,
  5. hawkers employed for sale of products,
  6. employees of cycle stand and canteen run in cinema theatres by contractors,
  7. members of editorial and administrative staff of a printing press publishing newspaper,
  8. a home worker rolling beedies at home,
  9. medical representative,
  10. persons employed in a hospital attached to and maintained by factory,
  11. part-time doctor employed for ambulance room,
  12. book binders engaged by a contractor, and
  13. sales clerk working in a factory. 


An employer/establishments covered under the E.S.I. Act is exempt from the provisions of Maternity Benefit Act and Workmen's Compensation Act. It is specifically provided that when a person is entitled to any of the benefits provided by the Act, then he shall not be entitled to recover any similar benefits admissible under the provisions of any other enactment.

Employer Contribution

The employer is required to contribute at the rate of 4.75% of the wages paid/payable in respect of every wage period. The employees are also required to contribute at the rate of 1.75% of their wages, except when the "average daily wages in a wage period" are equal to or less than Rs. 40. Employees earning less than and upto Rs. 40 per day are exempted from payment of contribution.

It is the employer's responsibility to deposit his own as well as employee's contributions in respect of all employees including the contract labour, into the E.S.I. Account.

The employer may deduct the employees contribution from his wages in respect of the period for which the contribution is payable.

Employee's Benefits


Every insured employee is entitled to the cash benefit for the period of sickness occurring during any benefit period and certified by a duly appointed medical practitioner if the contributions in respect of him were payable for not less than (78 days) in the corresponding contribution period.

However, in the case of a newly appointed employee, eligible for the first time who has got shorter contribution period of less than 156 days, he shall be entitled to claim sickness benefit if he pays contribution for not less than half the number of days available for working in such contribution period. The benefit is payable at the standard benefit rate, corresponding to his daily average wages. The benefit is, however, not payable for any day on which the employee works, remains on leave, holiday or strike, in respect of which he receives wages.

Sickness benefit shall be allowed to an employee for any day on which he remains on strike, if:-

  1. he is receiving medical treatment and attendance as an indoor patient in any E.S.I. hospital or a hospital recognised by the E.S.I. Corporation for such treatment; or
  2. he is entitled to receive extended sickness benefit for any of the diseases for which such benefit is admissible; or
  3. he is in receipt of sickness benefit immediately preceding the date of commencement of notice of the strike given by the Employees' Union to the Management of the factory/establishment.

No sickness benefit shall be payable for the first two days of sickness following, at an interval of not more than 15days, after the sickness in respect of which sickness benefits were last paid.

Further no sickness benefit shall be payable to any person for more than 91 days in any two consecutive benefit periods.


Any person in receipt of sickness benefit:

  1. shall remain under medical treatment at the ESI dispensary or hospital and carry out the instructions of the medical officer;
  2. shall not do anything which retards or reduces his chances of recovery;
  3. shall not leave the area where medical treatment is provided without the medical officer's permission;
  4. shall get himself examined by the medical officer.


A periodical cash benefit is payable to an insured woman employee, in case of confinement, miscarriage, medical termination of pregnancy, premature birth of a child, or sickness arising from pregnancy, miscarriage, etc., occurring or expected to occur in a benefit period, if the contributions, in respect of her were payable for atleast (70 days) in the two immediately preceding contribution periods.

The benefit is payable at twice the standard benefit rate or Rs. 20, whichever is higher, for all days on which the she does not work for remuneration during the period prescribed as under.


Rs. 250 on account of confinement expenses shall be paid to an insured woman and an insured person in respect of his wife, if confinement occurs at a place where necessary medical facilities under ESI Scheme are not available.


Disablement benefit is payable in the form of cash installments, to an employee who is injured in the course of his employment and is, permanently or temporarily, disabled, or contacts any occupational disease. It is sufficient if it is proved that the injury was caused by an accident arising out of, and in the course of employment, no matter when it occurred, and where it occurred.

The accident shall be deemed to have arisen out of and in the course of employment unless there is evidence to the contrary,

  1. where an accident happens while the employee is travelling in employer's transport, to or from his place of work;
  2. where an accident happens in or about any premises at which the employee is employed for the purposes of his employer's trade or business, while the employee is taking steps, in an emergency, to rescue, secure or protect persons who are injured or imperiled or to avert or minimize serious damage to property;
  3. where the employee is at the time of the accident acting in contravention of any law or any safety rules and instructions, if the employee is acting for the purpose of, and in connection with, the employer's trade or business.

The employee claiming any disablement benefit is required to furnish a medical certificate as prescribed under the regulations. The employee is also required to observe certain conditions as to the medical examination etc., as prescribed for sickness benefit.

The benefit for temporary disablement is, however, not payable for any day on which the employee works, remains on lease, holiday or strike, in respect of which he receives wages.

However, disablement benefit for temporary disablement shall be allowed to an employee for any day on which he remains on strike, if:

  1. he is receiving medical treatment and attendance as an indoor patient in any ESI hospital or a hospital recognised by the ESI corporation, for such treatment; or
  2. he is in receipt of such disablement benefit immediately preceding the date of commencement of notice of the strike given by the Employee's Union to the management of the factory/establishment.


The insured employee who sustains an employment injury should give a notice of the same to the employer or manager or supervisor or foreman, etc., by means of entry in the Accident Book or otherwise in writing or even orally. This notice is very important for claiming the disablement benefit.


In case of an accident in the establishment, the employer should prepare an 'Accident Report' in Form 16 (in triplicate) and submit to the local office and the Insurance Medical Officer. The third copy is the office copy. The reports are to be submitted within 48 hours in ordinary cases and immediately in death cases.


The employer shall make arrangements for the first aid and medical treatment and transport as an insured person may require, in case of an accident.


An employee shall not be entitled to receive for the same period-

  1. both sickness benefit and maternity benefit; or
  2. both sickness benefit and disablement benefit for temporary disablement; or
  3. both maternity benefit and disablement benefit for temporary disablement.

The employee shall be entitled to choose any one of the aforesaid benefits, at his discretion .


The employer should furnish and verify the particulars in Form 28, in respect of the abstention of an employee from work, for which sickness/maternity/temporary disablement benefit has been claimed.

Payment of Benefits in Case of Death

If an employee dies during any period for which he is entitled to a cash benefit, the amount of such benefit shall be payable up to and including the day of his death. The amount of benefit shall be paid to the nominee or, where there is no nomination, to the heir or legal representative of the deceased employee.


If an insured employee dies, the eldest surviving member of his family or the person who incurs the expenditure of funeral of the deceased employee, is entitled to reimbursement of such expenditure subject to a maximum of Rs. 1,500. The claim for the payment of funeral expenses should be submitted in the prescribed form along with prescribed documents within 3 months of the death of the insured employee.


In case of the death of an insured employee at the place of employment, the employer should immediately report to the local office and to the nearest E.S.I dispensary or hospital.

Inspector Duties and Powers

The E.S.I. Corporation may appoint Inspectors to carry out the purposes of the Act, within the local limits assigned to each of them.


The duties of an Inspector are:

  1. Inquiring into the correctness of any of the particulars stated in any return of contribution;
  2. Ascertaining whether any of the provisions of the Act has been complied with; and

Such other duties as may be authorised by the Corporation or specified in the regulations.


The Inspectors are vested with following powers to carry out their duties and functions aforesaid:

  1. To require any employer or contractor to furnish to him necessary information;
  2. To enter, at any reasonable time, any office, establishment, factory or other premises of the employer or contractor, and require the person in change thereof to produce for examination accounts, books and documents relating to the employment of persons and payment of wages, or to furnish to him necessary information;
  3. To examine the employer or contractor, his agent or servant, or any person found in the factory, establishment, office or other premises, or any employee; and
  4. To make copies of, or take extracts from, any register, account books or other document maintained in such factory, establishment, office etc.

Obligations of Employers

  1. The employer should get his factory or establishments registered with the E.S.I. Corporation within 15 days after the Act becomes applicable to it, and obtain the employer's Code Number.
  2. The employer should obtain the declaration form from the employees covered under the Act and submit the same along with the return of declaration forms, to the E.S.I. office. He should arrange for the allotment of Insurance Numbers to the employees and their Identity Cards.
  3. The employer should deposit the employees' and his own contributions to the E.S.I. Account in the prescribed manner, whether he has sufficient resources or not, his liability under the Act cannot be disputed. He cannot justify non-payment of E.S.I. contribution due to non-availability of finance.
  4. The employer should furnish a Return of Contributions along with the challans of monthly payment, within 30 days of the end of each contribution period.
  5. The employer should not reduce the wages of an employee on account of the contribution payable by him (employer).
  6. The employer should maintain the prescribed records/registers namely the register of employees, the inspection book and the accident book.
  7. The employer should report to the E.S.I. authorities of any accident in the place of employment, within 24 hours or immediately in case of serious or fatal accidents. He should make arrangements for first aid and transportation of the employee to the hospital. He should also furnish to the authorities such further information and particulars of an accident as may be required.
  8. The employer should inform the local office and the nearest E.S.I. dispensary/hospital, in case of death of any employee, immediately.
  9. The employer must not put to work any sick employee and allow him leave, if he has been issued the prescribed certificate.
  10. The employer should not dismiss or discharge any employee during the period he/she is in receipt of sickness/maternity/temporary disablement benefit, or is under medical treatment, or is absent from work as a result of illness duly certified or due to pregnancy or confinement.

Disputes & Remedies


The Employees State Insurance Scheme is administered by the Employees' State Insurance Corporation, which is constituted by the Central Government. It consists of representatives of the Central Government, medical profession and members of Parliament. The Corporation is vested with the following powers. 

  1. To promote measures for the improvement of the health and welfare of insured employees and for the rehabilitation and re-employment of those who have been disabled or injured
  2. To appoint inspectors for purposes of the Act.
  3. To determine the amount of contribution payable in respect of employees of a factory or establishment, which has not furnished or maintained any particulars, registers or records.


Any dispute arising under the Act shall be decided by the Employees Insurance Court and not by a Civil Court. It is constituted by the State Government for such local areas as may be specified and consists of such number of judges, as the Government may think fit. It shall adjudicate on the following disputes and claims.

Disputes as to-

  1. Whether an employee is covered by the Act or whether he is liable to pay the contribution, or
  2. The rate of wages or average daily wages of an employee, or
  3. The rate of contribution payable by the employer in respect of any employee, or
  4. The person who is or was the principle employer in respect of any employee, or
  5. The right to any benefit and the amount and duration thereof, or
  6. Any direction issued by the Corporation on a review of any payment of dependents' benefit, or
  7. Any other matter in respect of any contribution or benefit or other due payable or recoverable under the Act. 

Claims as to-

  1. Recovery of contributions from the principle employer,
  2. Recovery of contributions from a contractor,
  3. Recovery for short payment or non-payment of any contribution under section 68,
  4. Recovery of the value or amount of benefits received improperly under section 70,
  5. Recovery of any benefit admissible under the Act

No dispute shall be admitted unless the employer deposits with the Court 50% of the amount due from him as claimed by the Corporation.


An appeal shall lie to the High Court within 60 against an order of the Employees' Insurance Court if it involves a substantial question of law

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