Employees' State Insurance under the Social Security Code

Employees' State Insurance is India's contributory health and income insurance for workers, providing medical care and cash benefits for sickness, maternity and employment injury. Chapter IV of the Code on Social Security replaces the ESI Act, 1948, keeps its structure, and removes the old limitation to notified areas so that ESI can apply across India. This note covers coverage, contributions, benefits, dispute resolution and the leading cases.

1. Coverage and Contributions

Figure 1: Who is insured and who pays

• All employees insured, s.28. Every employee in an establishment to which the chapter applies is insured, whether employed directly or through a contractor.
• Contributions, s.29. Comprise the employer's and the employee's shares; the employer pays both to the Corporation and recovers the employee's share from wages. The rates have been unchanged since July 2019.
• ESI Corporation and Fund, ss.5, 25. The Corporation administers the scheme, and the Fund may be spent only on the purposes listed in s.26.
• Unorganised, gig and platform workers, s.45. The Corporation may frame schemes extending ESI to them.

2. Benefits, Section 32

Figure 2: Benefits available to insured persons

• Employment injury. Disablement and dependants' benefits depend on injury arising out of and in the course of employment, with presumptions in the employee's favour under s.34 and for occupational diseases under s.36.
• Breach of rules, s.35. An accident is treated as arising out of employment even if the employee was acting in breach of a law or an order, if the act was done for the employer's business.
• Excessive sickness, s.43. An employer whose insanitary or unsafe conditions cause excessive sickness can be made to pay the extra cost.

3. Disputes and Recovery

Figure 3: The Employees' Insurance Court

• Priority, s.47. Contributions due to the Corporation have priority over other debts.
• Default in registration, s.42. If an employer fails to register or pay, the Corporation may provide benefits and recover the cost from the employer.

4. Leading Cases

• Royal Talkies v ESIC (1978). 'Employee' is construed widely: workers of a contractor running a canteen and cycle stand in a cinema, employed in connection with its work, were covered.
• Regional Director, ESIC v Francis De Costa (1996). An accident on the way to work, before reaching the premises, was held not to arise out of employment. Under s.34(3) of the Code, an accident while commuting between residence and workplace is deemed to arise out of and in the course of employment, if a nexus with the employment is established.
• Bombay Anand Bhavan Restaurant v ESIC (2009). Restaurants and hotels are shops for the purpose of ESI notifications, read in the light of the beneficial purpose of the law.

5. Frequently Asked Questions

Which benefits are available under ESI?

Section 32 provides sickness benefit, maternity benefit, disablement benefit, dependants' benefit, medical benefit, which may extend to the family, and funeral expenses. Rates and qualifying conditions are prescribed by the Central Government and the Corporation.

Where are ESI disputes decided?

Questions on coverage, contributions, wages, benefits and recovery go to the Employees' Insurance Court under sections 48 to 51, which has exclusive jurisdiction. An employer must deposit 50% of the amount claimed, subject to reduction or waiver, and an appeal lies to the High Court on a substantial question of law under section 52.

6. Related Topics

• Topic 23: Maternity Benefit. Maternity protection outside ESI.
• Topic 24: Employee's Compensation. Injury compensation for those outside ESI.