The Central Government of India has recently extended the umbrella of the Employees’ State Insurance (ESI) Scheme to include Arunachal Pradesh, effective from November 1, 2020. This means the ESI scheme now operates in 568 districts across all States and Union Territories, with the exception of Lakshadweep.
The ESI Scheme: An Integrated Social Security System
The Employees’ State Insurance (ESI) Scheme is designed to offer social protection to workers and their dependents in the organized sector. They are ensured alleviation in situations like sickness, maternity and death or disablement resulting from an employment injury or occupational hazard.
Legal Framework: The ESI Act, 1948
The ESI Act, 1948 regulates the functioning of this scheme. The Act applies to factories and establishments in an implemented area employing 10 or more employees for wages. These establishments might belong to various classes including industrial, commercial, agricultural or others. The decision to extend the provisions of the ESI Act is the responsibility of the “appropriate Government,” whether it’s at the central or state level.
Most State Governments have stretched the ESI Act coverage to specific classes of establishments, such as shops, hotels, restaurants, cinemas, preview theatres, motors transport undertakings and newspaper establishments, provided they employ 10 or more persons. The state of Maharashtra, however, still maintains a threshold of 20 employees for the application of the Act.
Employee Eligibility Conditions
Employees earning a wage limit of up to Rs. 21,000 per month (or Rs. 25,000 per month in case of persons with disability) can avail the benefits of the ESI scheme.
Funding the ESI Scheme: A Self-Financing Model
Operating as a self-financed scheme, the ESI relies on contributions from both employers and employees. In June 2020, the government reduced the rate of contribution under the ESI Act from 6.5% to 4% (employers’ contribution was slashed from 4.75% to 3.25% and employees’ contribution from 1.75% to 0.75%). Employees earning less than Rs. 137 a day as daily wages are exempted from contributing their share.
Benefits of the ESI Scheme
Employees under the ESI Scheme, along with their dependents enjoy a variety of benefits such as Cashless Medical Care Services, Sickness Benefit, Maternity Benefit, Employment Injury Benefit and Dependant Benefit in case of death due to employment injury, Unemployment Benefit, and more. They also have access to unemployment allowance schemes like Atal Beemit Vyakti Kalyan Yojna (ABVKY) and Rajiv Gandhi Shramik Kalyan Yojna (RGSKY).
Administration of the ESI Scheme
The ESI Scheme is overseen by a top corporate body referred to as Employees’ State Insurance Corporation (ESIC), chaired by the Union Minister of Labour.