ESI Scheme in India: An overview!

7/27/2019 ESI Scheme in India: An overview!

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30 October 2013

Welcome

to the Training session.

Overview of the

ESI Scheme



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ESIC

The protective umbrella for the employers

Provides means for the economic growth of the nation

The safety net for the employees

Provides proper living conditions for the work-force

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The scheme was conceived originally by some

employers

They took concerted action for formal legislative

protection by nations

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Is the ESI Act, 1948a compulsory

provision?

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The ESI Act, 1948 isnot

a compulsory provision for any

factory or establishment

There are provisions for exemption.

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the benefits provided by him to his

employees aresubstantially similar

or

superior

to those provided for in the ESI Act,

1948.

AN EMPLOYER CAN RIGHTLY

DEMAND EXEMPTION,IF

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This condition must be reallyfulfilled.

The assertion will be verified withreference to the past records, in

spite of the exemption alreadygiven.

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What was the position when

there was no social securitysystem and no ESI Corporation?

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Industrial Revolution

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One side

In the 1820s, income levels for most workers began to improve, andpeople adjusted to the different circumstances and conditions. Bythat time, Britain had changed forever.

The economy was expanding at a rate that was more than twice the

pace at which it had grown before the Industrial Revolution. Although vast differences existed between the rich and the poor,

most of the population enjoyed some of the fruits of economicgrowth.

The widespread poverty and constant threat of mass starvation

that had haunted the preindustrial age lessened in industrial Britain.

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The other side• Employment

“Many parents were willing to allow their children to work in these new textile factories becausethey needed the extra money for their farm life. However, more workers were still needed. Onesolution to the problem was to obtain children from orphanages and workhouses. These children became known as pauper apprentices. This involved those signing contracts that virtually madethem the property of the factory and the factory owner. Children were expected to work from as young as four years old. Most child factory workers were orphans and had no other choice.Children usually weren't paid as much as grown men were. Their salaries usually came out to beone-third of the typical wage. There are some accounts of children being paid $0.25 per day fordelivering newspapers. Also, some of these children died from the hard work.”

• Punishments“Children were sometimes hit with a strap to make them work faster. In some factories children were dipped head first into the water cistern if they became drowsy. Children were also punishedfor arriving late for work and for talking to the other children. Apprentices who ran away from thefactory were in danger of being sent to prison. Children who were considered potential runaways were placed in irons. They would also have weights tied to their necks if they weren't workingquick or well enough.”

• Accidents

“One of the main concerns about the number of textile workers was the safety of the factories.Unguarded machinery was a major problem for children working in factories. There were reportsthat every year there were nearly a thousand people treated for wounds and mutilations caused bymachines in factories. Many of the workers were often abandoned from the moment the accidentoccurs.”

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Robert Owen – Philanthrophist businessman – Welsh – pleaded

for international agreement on social security.

Jerome Blanqui – 1838

Villerme – 1839 – France – Pleaded for international agreement.

Daniel Legrand – 1847 – Switzerland – “Men are men; not

producing machines”.

Karl Marx and Engels - 1848

3 0 O C T O B E R 2 0 1 3



15



• George Cadbury – 1860

• Louis Wollowiski -1873- France – introduced the first bill on

labour legislation before the French parliament.

• Ottowan Bismark – Germany - Accident Insurance, 1883,Maternity, 1884, Sickness and Oldage Pension, 1889

• German Emperor – 1890 – convened the first International

Labour Conference in Berlin.

3 0 O C T O B E R 2 0 1 3



• Another conference at Brussels – 1897

• International Association for Labour Legislation by

a voluntary organisation – 1900

• Two more conferences at the instance of the same Association at Berne, Switzerland – 1905 and 1906.

• National Insurance Act, 1911 – passed in the UK.

• Another International Conference at Berne

recommends action programme – 1913

3 0 O C T O B E R 2 0 1 3



Upton Sinclair

In 1904 Sinclair spent seven weeks in disguise, working undercover in Chicago's meatpacking plants to researchhis fictional exposé, The Jungle. When it appeared in 1906, it became a best-seller.

The Jungle is a 1906 novel written by author and journalist Upton Sinclair. Sinclair wrote this novel to highlight

the plight of the working class and to remove from obscurity the corruption of the American meatpacking industry

during the early-20th century.

The novel depicts in harsh tones the poverty, absence of social programs, unpleasant living and working

conditions, and hopelessness prevalent among the working class, which is contrasted with the deeply-rooted

corruption on the part of those in power. The sad state of turn-of-the-century labor is placed front and center for the American public to see, suggesting that

something needed to be changed to get rid of American “ wage slavery”.

The pressure and the public outcry, led to the passage of the Meat Inspection Act and the Pure Food and Drug Act

of 1906,

Upton Sinclair originally intended to expose "the inferno of exploitation [of the typical American factory worker

at the turn of the 20th Century]," but the reading public instead fixated on food safety as the novel's most pressing

issue.

In fact, Sinclair bitterly admitted his celebrity rose, "not because the public cared anything about the workers, but

simply because the public did not want to eat tubercular beef“

Sinclair rejected the legislation, as he viewed it as an unjustified boon to large meat packers partially because the

U.S., rather than the packers, was to bear the costs of inspection at $30,000,000 a year. He famously noted the

limited effect of his book by stating, "I aimed at the public's heart, and by accident I hit it in the stomach."

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http://en.wikipedia.org/wiki/Meat_Inspection_Act

http://en.wikipedia.org/wiki/Pure_Food_and_Drug_Act_of_1906




http://en.wikipedia.org/wiki/Meat_Inspection_Act



Sweatshops of 1845 - Punch

Courtesy: wikipedia

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National Insurance Act, 1911 – passed in theUK.

Another International Conference at Berne

recommends action programme – 1913

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Chronology of events

1918 – First World War is over

1919 –International Labour Organisation is

formed – Treaty of Versailes on28.6.1919

1920 – Ratification of ILO convention by

various nations followed byimplementation.

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Preamble of the Constitution

of the

International Labour Organisation

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Whereas universal and lasting peace can be established only if itis based upon social justice;

And whereas conditions of labour exist involving such injusticehardship and privation to large numbers of people as to produceunrest so great that the peace and harmony of the world areimperilled;

and an improvement of those conditions is urgently required; as, forexample, by the regulation of the hours of work including the establishment of a maximumworking day and week, the regulation of the labour supply, the prevention of unemployment,the provision of an adequate living wage, the protection of the worker againstsickness, disease and injury arising out of his employment the

protection of children, young persons and women, provision for old age and injury, protection ofthe interests of workers when employed in countries other than their own, recognition of theprinciple of equal remuneration for work of equal value, recognition of the principle of freedomof association, the organization of vocational and technical education and other measures;

Whereas also the failure of any nation to adopt humaneconditions of labour is an obstacle in the way of other nationswhich desire to improve the conditions in their own countries;

The High Contracting Parties, moved by sentiments of justice andhumanity as well as by the desire to secure the permanent peaceof the world , and with a view to attaining the objectives set forthin this Preamble, agree to the following Constitution of theInternational Labour Organization:



1920 As per the ILO Conventions

Labour welfare legislations are

enacted the world over.

But India hesitates

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1922 – Indian reluctance is criticised in the

ILO. One member went on record saying that

among the civilised countries, India is the

only country where no social security

measures is in existence. Immediately, the embarrassed Indian

representatives gave an assurance that

steps would be taken to enact legislation

for insurance in respect of accidents.



The earlier enactments like the Fatal

Accidents Act, 1885 or The WorkersBreach of Contract Act, 1859 or the

Employer and the Workmen’s (Disputes) Act, 1860 did not significantly help the

working population in India as they did

in England.

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“At the last session of the Indian Legislative Assembly, a resolution, tabled byMr. Joshi, helps to illustrate the condition of servitude in which Indian workers

still are, despite the attempt at organisation begun by the Trades Union

Congress. This resolution contained the demand for the repeal of the

Workmen’s Breach of Contract Act, and the removal from the Indian Penal

Code of sections 490 and 492, which permit imprisonment for certain

breaches of contract. Under the Breach of Contract Act a worker who fails tofulfil his contract of service, having received an advance of money from his

employer, is liable to be called on to repay the advance or fulfil his contract,

failing which he can be imprisoned. This law was passed shortly after the

Indian Mutiny, and embodies in fact the chief feature of indentured labour.

The Assembly, after much debate, agreed that there was a strong case for

the repeal of these laws, and consented to introduce legislation to that effectif, after consulting the Local Governments, the majority favoured repeal. “

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“State intervention in labour matter can

be traced back to the enactment of theEmployers and Workmen’s Disputes Act

1860 which provided for the speedy

disposal of the dispute relating to thewages of workmen engaged in railways,

canals and other public works, by

Magistrates. After World War-1 however,

State intervention in Dispute Resolution

became more systematic and effective.”

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Are they social security enactments?

Fatal Accidents Act, 1855

The Workers Breach of Contract Act,

1859 the Employer and the Workmen’s

(Disputes) Act, 1860

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The Fatal Accidents Act, 1855

• An Act to provide compensation to families for loss

occasioned by the death of a person caused by actionablewrong.

• Preamble.

• Whereas no action or suit is now maintainable in any court

against a person who, by his wrongful act, neglect, ordefault, may have caused the death of another person, and

it is often-times right and expedient that the wrong-doer in

such case should be answerable in damages for the injury so

caused by him; It is enacted as follows:30 October 2013



1-A. SUIT FOR COMPENSATION TO THE FAMILY OF A PERSON FOR LOSS

OCCASIONED TO IT BY HIS DEATH BY ACTIONABLE WRONG.

1[1A.] Suit for compensation to the family of a person for loss occasioned to it

by his death by actionable wrong.—Whenever the death of a person shall becaused by wrongful act, neglect or default, and the act, neglect or default is such as

would (if death had not ensued) have entitled the party injured to maintain an

action and recover damages in respect thereof , the party who would have

been liable if death had not ensued, shall be liable to an action or suit for damages,

notwithstanding the death of the person injured, and although the death shall have

been caused under such circumstances as amount in law to felony or other crime. 2[***] Every such action or suit shall be for the benefit of the wife, husband, parent

and child, if any, of the person whose death shall have been so caused, and shall be

brought by and in the name of the executor, administrator, or representative of the

person deceased; and in every such action the Court may give such damages as it

may think proportioned to the loss resulting from such death to the parties

respectively, for whom and for whose benefit such action shall be brought; and the

amount so recovered, after deducting all costs and expenses, including the costs notrecovered from the defendant, shall be divided amongst the before-mentioned

parties, or any of them, in such shares as the Court by its judgment or decree shall

direct.

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Workmen’s Breach of Contract Act, 1859

At the last session of the Indian Legislative Assembly, a resolution, tabled by

Mr. Joshi, helps to illustrate the condition of servitude in which Indian workers

still are, despite the attempt at organisation begun by the Trades Union

Congress.

This resolution contained the demand for the repeal of the Workmen’s

Breach of Contract Act, and the removal from the Indian Penal Code of

sections 490 and 492, which permit imprisonment for certain breaches of

contract.Under the Breach of Contract Act a worker who fails to fulfil his contract of

service, having received an advance of money from his employer, is liable to

be called on to repay the advance or fulfil his contract, failing which he can

be imprisoned.

This law was passed shortly after the Indian Mutiny, and embodies in fact the

chief feature of indentured labour. The Assembly, after much debate, agreed

that there was a strong case for the repeal of these laws, and consented to

introduce legislation to that effect if, after consulting the Local Governments,

the majority favoured repeal.

30 October 2013



Employers and Workmen’s Disputes Act

1860

State intervention in labour matter can be

traced back to the enactment of the Employers

and Workmen’s Disputes Act 1860 which

provided for the speedy disposal of the dispute

relating to the wages of workmen engaged in

railways, canals and other public works, by

Magistrates. After World War-1 however, State intervention

in Dispute Resolution became more systematic

and effective.30 October 2013



ENGLAND

• Factory Acts were introduced to protect working people fromemployers who permitted dangerous practices in workplaces.

• The first Acts of 1809 and 1823 failed to include effective

enforcement clauses.

• In 1833 Lord Ashley (later earl of Shaftesbury) introduced the firsteffective law, establishing an inspectorate with powers to enter

premises and require compliance with restrictions on the

employment of women and children.

• A coherent law relating to safety at work was not achieved until1969 when the Health and Safety Executive was set up.



The factory reform movement spurred

the passage of laws to limit the hours that

could be worked in factories and mills. The first aim of the movement was for a

"ten hours bill" to limit to ten hours the

working day of children. Richard Oastler was one of the

movement's most prominent leaders.



Factories Act 1802

The Factories Act 1802 (sometimes also called the"Health and Morals of Apprentices Act") was an Actof the Parliament of the United Kingdom whichregulated factory conditions, especially in regard to

child workers in cotton and woollen mills. It was the culmination of a movement originating in

the 18th century, where reformers had tried to pushseveral acts through Parliament to improve thehealth of the workers and apprentices.

The act had the following provisions:

Factory owners must obey the law.



All factory rooms must be well ventilated and lime-washed twice a year.

Children must be supplied with two complete outfitsof clothing.

Children between the ages of 9 and 13 can workmaximum 8 hours.

Adolescents between 14 and 18 years old can work

maximum 12 hours.Children under 9 years old are not allowed to work

but they must be enrolled in the elementary schoolsthat factory owners are required to establish.

The work hours of children must begin after 6 a.m.,

end before 9 p.m., and not exceed 12 hours a day.



Children must be instructed in reading, writing andarithmetic for the first four years of work.

Male and female children must be housed indifferent sleeping quarters.

Children may not sleep more than two per bed.

Factory owners are also required to tend to anyinfectious diseases.

Fines of between £2 and £5 could be imposed onfactory owners, but the Act established no inspection regime to enforce conditions.

The act failed to provide a clear law of the hoursone is permitted to work and failed to includesupervision to make sure the law was beingfollowed.



India has not done enough in social security space:

ILO report: 2010

GENEVA: India has performed poorly in providingsocial security protection to its people until recentlywith "very high vulnerability" to poverty and informallabour practices in the world, according to a report

released by the International Labour Office (ILO)today, 16.11.2010, Times of India.

In its first comprehensive 'World Social SecurityReport', the ILO has suggested that India has notdone enough in the arena of social securityprotection, which is reckoned as the "human face ofglobalisation, in line with its fiscal status".



INDIA

PENSIONS' ACT, 1871

FACTORIES ACT, 1881

PROVIDENT FUNDS ACT, 1925 PAYMENT OF WAGES ACT, 1936

INSURANCE ACT, 1938

EMPLOYMENT OF CHILDREN ACT, 1938



Insurance Act 1938

Law relating to the business of insurance.

3*[(4) "auditor" means a person qualified

under the Chartered Accountants Act,

1949 (38 of 1949), to act as an auditor ofcompanies;]

http://www.liiofindia.org/in/legis/cen/num_act/caa1949214/






30 October 2013

1923 – Workmen’s Compensation

Act,1923 comes into existence.

1927 – ILO Convention for Sickness

Insurance.

1928 – Government of India refuses to

ratify the ILO convention of 1927.



Reasons given by the Government

in 1928.

1. Migratory nature of Indian labour;

2. Preference to Indigenous system of

medicines;

3. Want of qualified doctors;

4. Resistance of workers to any

compulsory deduction;

5. Lack of financial resources with

the Government.

30 October 2013



Centre, then, asked for the comments of the

States.

Punjab: Recommended Sickness Insurance, but

no administrative machinery was recommended.

West Bengal: Did not say anything, as the

Royal Commission of Labour was to visit Indiasoon.

Chennai: Suggested PF for all contingencies.

All the States were against the Governments’

financing of the Scheme.

The Royal Commission of Labour has also

recorded these details extensively in Page 266

of its report (Chapter XIV).30 October 2013



Royal Commission of Labour

1929-31

“The question of making provision

for workers during sickness, even if ithad not been previously raised by

Government, would have been forced

on us by what we found in every

industrial centre.”

45




1929-31

“Of the great need of the workers for something of this kind, there can be no

doubt. By common consent the incidence of sickness is substantially higher

than in Western countries; the medical facilities are much less adequate and

the wages generally paid make it impossible for most workers to get through

more than a very short period of illness without borrowing. Indeed, sickness is

an important contributory cause of indebtedness, with all that debt entails

under existing conditions; for often, at his time of greatest need, the worker

may find himself destitute of resources, unable to take proper measures to

restore his health and in difficulties regarding even the means of subsistence.The situation calls for the exploration of all methods that may lead to the

alleviation of the existing hardships.”

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“Of the great need of the workers for something of this kind, there can

be no doubt.

By common consent the incidence of sickness is substantially higher

than in Western countries;

the medical facilities are much less adequate and the wages generally

paid make it impossible for most workers to get through more than a

very short period of illness without borrowing.

Indeed, sickness is an important contributory cause of indebtedness,

with all that debt entails under existing conditions;

for often, at his time of greatest need, the worker may find himself

destitute of resources, unable to take proper measures to restore his

health and in difficulties regarding even the means of subsistence.

The situation calls for the exploration of all methods that may lead to

the alleviation of the existing hardships.”

30 October 2013




Its recommendations were considered by the Government

of India

In consultation with

The Standing Advisory Committee of the Labour and

Industries Department

And

The Government Actuarial Department in London.

It was, then, decided to

Drop the matter for the time-being.

30 October 2013



But,

Labour movements pressed for the

insurance scheme;

The Textile Labour Enquiry committee set up

by Mumbai Government, The Kanpur Textile Labour Enquiry

committee set up by the UP Government and

The Bihar Labour Enquiry Committee

Recommended introduction of a contributory

sickness insurance scheme.

30 October 2013



U.S. Social Security Act, 1935

New Zealand Social Security Act, 1938



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1939-1945 - The Second World War.

1945- Germany is apportionedamong four powers. The Germaneconomy gets reduced to ashes.



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1971 – The Hindu headline reads, “German DM attains full value”.

The economic miracle of West Germanyhas been attributed to the splendid socialsecurity system of that country.



1941- Second World War was on.

Winston Churchill entrusts the work of formulating

a comprehensive labour welfare legislation for thepost war Britain.

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• Ernest Bevin, Minister of Labour, asked Beveridge tolook into existing schemes of social security, whichhad grown up haphazardly, and make

recommendations.• The Report to the Parliament on Social Insurance

and Allied Services was published in 1942.

• It proposed that all people of working age should

pay a weekly national insurance contribution.• In return, benefits would be paid to people who

were sick, unemployed, retired or widowed.

• Beveridge argued that this system would provide a

minimum standard of living "below which no oneshould be allowed to fall".

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Beveridge said that the government shouldfind ways of fighting the five ‘Giant Evils’ of

Want,

Disease, Ignorance,

Squalor and

Idleness. Which one of the five is easier to tackle?

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The most remarkable asset of the Report was the

convincing manner of Beveridge's argument which madeit so widely acceptable:

Beveridge appealed to conservatives and other doubters

by arguing that the welfare institutions he proposed wouldincrease the competitiveness of British industry in the

post-war period, not only by shifting labour costs like

healthcare and pensions out of corporate ledgers and onto

the public account, but also by producing healthier,

wealthier and thus more motivated and productive

workers who would also serve as a great source of demand

for British goods.



The report of Sir William Beveridge came

to be described as a monumental

document on social security.

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From its inception, the ILO has recognizedsocial justice as a prerequisite to worldpeace.

After the Second World War, its aims andpurposes were reasserted andstrengthened in The Declaration ofPhiladelphia , adopted on May 19, 1949,which states:

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Money Today 27.11.2008

―My boss was candid enough to say that onecan stay only as long as one is useful,‖ saysDelhi-based A. Gaurav.

―Product life-cycles are short. Constantinnovation and product repositioning are thenorm. It’s essential to keep moving just to

survive,‖ says Dony Kuriakose, director, EdgeExecutive Search.

The product Kuriakose is talking about is

you —the employee.



Declaration of Philadelphia

1. Labour is not a commodity;

2. Freedom of expression and associationare essential to sustained progress;

3. Poverty anywhere constitutes a dangerto prosperity anywhere; [and]

4. All human beings, irrespective of race,creed or sex, have the right to pursueboth their material well-being and theirspiritual development in conditions offreedom and dignity, of economicsecurity and equal opportunity.

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A Canadian study suggests that the

wealthiest nations do not have the

healthiest people; instead, it is countries

with the smallest economic gap between

the rich and poor. (Mark Bourrie – Inter

Press Service -23.7.1999).

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The wealthiest nations do not have the

healthiest people;

instead, it is countries withthe smallest economic gap between the

rich and poor .

(Mark Bourrie – Inter Press Service -23.7.1999).

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While addressing businessmen, in

the year 1945, after the Second

World War, UK Minister ErnestBevin stressed on the need for

providing basic economic security

to create fairer conditions of living

for the working population also.

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“If profit can be the only

motive, the natural corollary iseconomic disorder, and

economic disorder will bring

you back to the same position

you are in now, ever recurring,

and future generations will

again pay, in the same form or

another, the bitter price we arepaying now…” he said.



30 October 2013

Indian Government asks Prof. B.P. Adharkar

to prepare such a report for India.

He submits his report “Planning on Social

Security in India”

on

15.8.1944.



Universal Declaration of

Human Rights

Everyone, as a member of society,has the right to social security

• -Article 22

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30 October 2013

Consequently, the ESI Act, 1948 isborn as part of the first package oflabour welfare measures

immediately after Indianindependence.



Fundamental Principles

1. The proposed scheme must not be tooambitious in the beginning;

2. It must be simple, clear and

straightforward,3. It must be financially sound, economical

in working and actuarially balanced;

4. It must minimize disputes and litigation;

5. It must be workable in the peculiarcircumstances of Indian labour andindustry;

30 October 2013



Courtesy: Times of India

30 October 2013



Fundamental Principles (Contd.)

6. It must be in conformity withinternational labour conventions;

7. It must not be saddled with financial

responsibilities which belong toother measures of social securityand finally

8. It must be sufficiently flexible.

30 October 2013



Not to be saddled

For the success of the ESI Scheme, Prof.Adarkar wanted certain extra measures tobe taken. His stand was that the ESI

Scheme should not be “saddled withburdens legitimately belonging toother branches of social insurance”.Therefore, while formulating the ESI

Scheme, he made four assumptions forits success.

30 October 2013



Four Assumptions

(a) Adoption of a scheme for Unemployment Insurance and

creation of new employments in the post war period,

(b) Establishment of a scheme of Old Age Pension,

(c) Adoption of certain pre-medical measures like education inhealth and improvement in environment hygiene besides

regulation of wages and rigorous enforcement of factory laws and,

finally,

(d) National Health Drive.

30 October 2013



Art. 41 of the Constitution

The State shall, within the limits of

its economic capacity and

development, make effective

provision for securing publicassistance in case of unemployment,

old-age, sickness, disablement and

other cases of undeserved wants.

30 October 2013



What is Art. 42?

Why is it there in the Directive Principles?

30 October 2013

The social security system of a



30 October 2013

The social security system of acountry is

the symbol of civilisation.

The extent of its success depends upon thedegree of maturity of the society as a

whole.



• “The political costs of inequalityare recognized and accepted as

being too high. The economic costs

of fighting the effects are also high.Citing some research, the BBC also

noted that for each dollar spent on

poverty causes, seven dollars weresaved on consequences.”

30 October 2013



addresses and

provides solutionprecisely to

this problem30 October 2013

ESI Act, 1948

Statement of Objects and Reasons



Statement of Objects and Reasons

Bill No. 54 of 1946

Workmen’s State Insurance Bill

“1. The introduction of a scheme of Health

Insurance for Industrial Workers has been under

the consideration of the Government of India for

a long time. The necessity for such a scheme hasbecome more urgent in view of the conditions

brought about by war.”

78



The ESI Corporation runs an importantscheme which is the bedrock of societyas a whole . The scheme provides the

basic structure for the nation’seconomy.

30 October 2013



The World Bank's report in 1994 hadidentified the existence of the linkbetween the sound social security

system of a country and its ability tocompete effectively in the worldmarket.

30 October 2013

FRAGILE DEMOCRACIES INEQUALITY



FRAGILE DEMOCRACIES, INEQUALITY

“TURN GOOD PEOPLE TO EVIL”

• In May 2002, the BBC aired a documentary related to inequality,called “The Experiment”, where they showed in detail howinequality can “turn good people to evil”.

• Inequality is also characterized by a concentration of wealth, whichmeans concentration of political power.

• Historically, one of the main reasons for continued poverty has been

the desire to maintain this power.

• The ESI Corporation, precisely, provides solution in that context.

“ h h i h k



“Everyone has the right to work, to

just and favourable conditions of work

and to protection for himself and hisfamily [and] an existence worthy of

human dignity … Everyone has the

right to a standard of living adequatefor the health and well being of

himself and his family, including food,

clothing, housing and medical care.”

-Who said this?

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And, in the year 2012

30 October 2013



Sweatshops

The chemicals used in the processing of --------products in the

sweatshops in a foreign country, are at 177 times the legal limit. 77

percent of workers in these shops are subject to respiratory, liver,kidney problems.

30 October 2013



"The Human Racehas improved

everythingexcept the human

race."- Adlai Stevenson

30 October 2013

E i H t it?



Experience – How to use it?

We must use our experience and notget tied down by experience.

-Beveridge

30 October 2013



PROVIDINGSOCIAL SECURITY

ISTHE RESPONSIBILITY OFTHE STATE

30 October 2013

ESI C ti



ESI Corporation

The scheme is administered by a dulyconstituted corporate body called the

Employees’ State Insurance Corporation (ESIC).

It comprises members representing Central and

State Governments, Employers, Employees,Parliament and the medical profession.

Union Minister of Labour functions as Chairman

of the Corporation whereas the Director

General, as chief executive, discharges the dutyof running the day-to-day administration.

30 October 2013



ESI Corporation

Constitution

6 10 1948

St di C itt



Standing Committee

A Standing Committee representingall stakeholders is elected from the body

corporate for managing the affairs of the

scheme and monitoring the progress ofimplementation of various decisions

and policies from time to time.

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Medical Benefit Council



Medical Benefit Council

A statutory body advises theCorporation on matters related to

administration of medical benefit under

the ESI scheme.

30 October 2013



• Can the Chairman be authorised toexercise the powers of the ESI

Corporation by the ESI

Corporation?

ESI Act is applicable to



ESI Act is applicable to

Non-seasonal factories, using power in themanufacturing process, employing 10 or morepersons in receipt of monthly wages notexceeding Rs.15,000/- (excluding overtimeallowance)

Hotels/Restaurants., Shops, Cinema housess,Newspaper establishments, Road MotorTransport establishments employing 20 or

more persons for wages not exceedingRs.15,000/- per month in Tamil Nadu

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Sec.1(4)

Sec. 1(5)

Sec.1(5) casts the security net wider than Sec. 1 (4).

94



SE 1 5)

Extension of all or any of the provisions of the Act. To any establishment,

To any class of establishments, Such establishments may be

industrial,

commercial,

agricultural or

otherwise.

95

Sec. 1 (5)



Sec. 1 (5)

The types of establishments notified as coverable byState G0vernments: Hotels, Restaurants, Cinema houses including preview theatres,

Road transport establishments (Running staff can beexempted under Sec.88) News paper establishments as defined in the

WJ(CS&MP) Act,1955 Shops.

Factories employing 20 or more persons without theaid of power in the manufacturing process (upto1989)

96

Coverage of „Employees‟



Coverage of Employees

All persons employed for wages inconnection with the work of a factoryor an establishment to which the Actapplies

All employees under Sec. 38 impliescoverage of all, whether they areregular or casual or temporary workeror time rated or piece rated worker,part-time workers, trainees, etc.,

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Categories of Employees

Directly employed by the Principal Employer eitherin factory /establishment or elsewhere

Employed by / through immediate employer

(contractor) in the premises or outside thepremises under the supervision of PrincipalEmployer

Those, whose services are temporarily lent or leton hire to the Principal Employer

All employees within the wage limit are coverable.

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Employed in connection with theadministration, purchase of rawmaterials, distribution or sale of theproduct of the factory /

establishment. Part time employees on contract of

service

Outsourced process – Element of

supervision is essential.

Contract of Service Vs. Contract forservice.

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Contribution Benefit Period



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Contribution

Period

Benefit Period

From 1.4.2012 to 30.9.2012 From 1.1.2013 to 30.6.2013

From 1.10.2012 to 31.3.2013 From 1.7.2013 to 31.12.2013

Contribution Payable=

Employer’s share of contribution @ 4.75% of employee’s wages

Employee to pay @ 1.75% of employee’s wages +

Eligibility for Sickness Benefit = on the contribution being

payable / paid for 78 days in the corresponding contribution

period.

First Contribution Period and First Benefit Period



The ESIC charges interest , if the employers

do not pay the contributions in time.

The ESIC imposes damages, if the employers

do not pay the contributions in time.

The ESIC recovers the arrears through

coercive measures, if the employers do not

pay the contributions, interest and damages.

The ESIC prosecutes too, in such cases.

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Benefits under

the ESI Act, 1948

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Medical Benefit



Medical Benefit

It is admissible from the first day ofinsurable employment.

To the Insured Person and his family

members.Super speciality treatments as per theadministrative instructions.

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Sickness Benefit



Sickness Benefit

Wages Rs. 5000 p.m. Standard Benefit Rate Divide the total wages paid during the

contribution period by the number ofdays for which these wages were paid 30000/ 183=163.93 Sickness Benefit = Rs. 163.93x70%One month sickness Benefit payable

is = Rs. 115x30=3450

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What is sickness?



What is sickness?

Suffering from disease

Requiring medical

treatmentRequiring abstention of

medical grounds

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Eduardo Doryan



y"The debt crisis of the 1980's in Latin America, and then therecent East Asia Crisis, have shown just how quickly people's

lives are turned upside down by steep recession, and how thepoor suffer the most during these times," says Eduardo Doryan,the World Bank's Vice President for Human Development, and aformer Costa Rican Education Minister, 1994-98.

"So social safety nets are vital to catch people who lose their

jobs, become hungry or sick.

But a system that solely concentrates on helping poor peopledeal with a crisis once it happens runs the risk of keeping themin a poverty trap by not providing any opportunities.

We need to embrace a more holistic approach that makes socialprotection more like a springboard that lets people jump intomore secure lives."

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Extended Sickness Benefit



Extended Sickness Benefit

34 diseases Wages Rs. 5000 p.m.

S.B= 115.00x91=10465.00

309 days x Rs. 132 per day (163.93 x 80%)

330 days x Rs. 132 per day

Total 730 days

Eligibility: On payment of contribution for

183 days in preceding four contributionperiods and is eligible for SB in one period atleast.

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Enhanced sickness Benefit



Enhanced sickness Benefit

to promote family welfare.

7 days for men

14 days for women

Benefit paid is equivalent to the

wages

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Temporary Disablement Benefit



Temporary Disablement Benefit

• Wages Rs. 5000 p.m.• Any number of days x Rs.148 per day

• If disabled for 30 days

148x30=4440.

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Permanent Disablement



Benefit

Wages Rs. 5000 p.m.

If disabled permanently

Monthly payment as per thepercentage of loss of earning capacity.

If it is 50%, then the monthly paymentis 50% of Rs. 4440.

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D d B fi



Dependants Benefit

Wages Rs. 5000 p.m.

If the employment injury is a fatal one,

Monthly payment to his family members

Rs. 4440 is apportioned among wife and

children.

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Maternity Benefit



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Maternity Benefit



Maternity Benefit

• Wages Rs. 5000 p.m.

• Standard Benefit Rate Rs. 163.93

• Maternity Benefit = SBR

• Cash Benefit for 84 days initially.

• Can be extended for another 30 days in

case of sickness due to pregnancy or

confinement.

• One month MB = 164x30 = 4920

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Maternity Benefit



Maternity Benefit

Maternity Benefit is available formiscarriage also.

Cash benefit for 42 days which can be

extended to 30 more days in case ofsickness due to pregnancy or miscarriage.

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OTHER BENEFITS



Funeral Expenses

Old Age Medical Care

Vocational Rehabilitation

Physical Rehabilitation

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UNEMPLOYMENT ALLOWANCE



UNEMPLOYMENT ALLOWANCEUnique scheme for extending ―cash-assistance‖ to the

employees covered under the ESI Act (Insured Persons)while they become unemployed in certain contingencieshas been introduced by the ESI Corporation with effectfrom 1-4-2005.

According to this Scheme, cash payment will be given tothe affected insured persons to the maximum of one yearor till re-employed whichever is earlier.

This benefit is called as ―RAJIV GANDHI SHRAMIK KALYAN

YOJANA‖.

See Administrative instructions for more.

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ESIC – The benefactor par-excellence



ESIC The benefactor par excellence

“The package (of benefits provided bythe ESIC) can rarely be matched byprivate employers on their own because

of the heavy costs involved – not tomention the disinclination amongemployers, with honorable exceptions, tooperate health care systems for theirworkforce”

– The Hindu (1.1.2005).30/10/2013117

Sec. 1 (5)



Sec. 1 (5)

Sec. 1 (5) specifies that the scheme canbe extended to all. The phrase “any otherestablishment or class of establishments,

industrial, commercial, agricultural orotherwise ” shows that the intention of thegovernment is to extend the benefits to

everybody gradually in the order in whichit has been provided there.

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Some milestones in the history ofthe ESI Corporation

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1948



1948

The ESI Act, 1948 was passed byDominion Legislature on 19th April 1948.

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1951



The employers who were brought under coverage of the Actcomplained that there was rise in the cost of production and their

competitive capacity with the industries located in neighbouringcentres decreased.

The government , therefore, introduced the concept of Employers‟Special Contribution which necessitated the employers throughout thenation to pay a nominal contribution, ot exceeding 5% of the totalwage bill of the employer, to the ESI Corporation, with the intention tospread the incidence of cost of the scheme equitably. That was theprimary intention of the amendment of the year 1951.

On the 24th November, 1955, Chapter VA became applicable to the

whole of India except the State of Jammu and Kashmir. This Chapterprovides for Transitory Provisions. During the transitory period everyprincipal employer had to pay to the Corporation a special contributionsubject to the other provisions in the Chapter.

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1966



Dependant parents of insured women were included in the definition of the tem „family‟.Dependant parents of insured persons had already been included.

Provision for the taking over by the ESI Corporation of the administration of the medicalbenefit from State Government was made.

Sec. 2-A to make it obligatory for the Principal Employer to have his factory orestablishment registered under the Act, was inserted. Reg. 10-B came later in the year

1968.

Sec. 45-A and Sec. 45-B were introduced.

Alternative Evidence of sickness concept was introduced.

Maternity Benefit provisions for miscarriage was introduced.

Maternity Benefit provisions were also extended to sickness arising out of pregnancy,confinement, premature birth of child, miscarriage.

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1970



1970

The words “except the State of Jammu andKashmir” were omitted from Sec. 1(2).

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1975



1975

Wage limit increased to Rs. 1000.

Provision for compulsory imprisonmentunder Sec. 85 was introduced.

Sec. 85-A, 85-B and 85-C were added. Sec. 405 IPC was amplified to cover non-

payment of contribution recovered by theemployers from their employees.

Sec. 93-A was added to saddle the liabilityon the transferee also.

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1984



98

Wage limit was increased to Rs. 1600.

Employer‟s share of contribution was

delinked from the employee‟s share toreduce clerical work of the employers.

“Week” was changed and “wage period”concept was introduced.

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1989



Children up to the age of 21 years and

infirm children without any age restrictionwere included as „family‟ members.

Number of employers and employees

representatives in the Corporation becameten.

Wage ceiling, rate of contributions, period

and conditions of grant of benefits andwage limit for exemption were taken toRules.

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Recovery machinery was set up exclusively for



Recovery machinery was set up exclusively forthe ESI Corporation duly vested with the powers

available under the Income Tax provisions.

Retired insured persons and the persons who

leave insurable employment due to employmentinjury on payment of Rs. 120 was introduced.

Condition to deposit 50% of the claim in dispute

was introduced.

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2010



Amendments were made extensively in variousspheres of activities of the Organisation. As theyare of recent events, the details are notprovided here. Suffice it to say that the

definition of the term factory has undergone asignificant change with the requirement ofpower having been removed and the phrase “forwages” deleted. The opening of medicalcolleges opens a new chapter in the functioningof the scheme.

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Has to be run only byGovernments



Governments

The ESI Scheme in India which collects only1.75% of wages as Employees Contribution isstill viable for almost 6 decades without anyassistance from Central Government, only

because it is compulsory and also becausethe field of dispersal of benefit load islarger. This is in sharp contrast to the positionobtaining in smaller countries where theemployees contribution is much more, rangingfrom 27 to 73%.

30 October 2013

Robert Owen



“What ideas individuals may attach to the term"Millennium" I know not; but I know that society may beformed so as to exist without crime, without poverty,with health greatly improved, with little, if any misery,

and with intelligence and happiness increased ahundredfold; and no obstacle whatsoever intervenesat this moment except ignorance to prevent such astate of society from becoming universal.”

- Robert Owen, 1.1.1816when he opened the

Institute for the Formation of Character.

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Courtesy: Wikipaedia

30 October 2013

Advantages to Employers



Exemption from

a) Maternity Benefit Act

b) Workmen Compensation Act

Absolved of all liabilities of providingmedical facilities to employees and

their dependants in kind or cash or asfixed cash allowance

132



Is the role of the Statenecessary in the scheme ofthings?

133



Assures proper andcorruption-free

administration toachieve the purpose

of the Scheme.134



―Health is one area in

which the public sectorconsistently does a better

job than the private sectorat controlling costs‖

-Paul Krugman

Nobel Prize winner

(The Hindu – 14.6.2011)135



Now

you know

30 October 2013



the essential facts

pertaining to

the history of social security

30 October 2013



Congrats

ESI Scheme in India: An overview!

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