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Employee State Insurance (ESI)

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Employee State Insurance (ESI) is the first self-financing health insurance cum social security scheme launched for the working class (with monthly income below Rs.15000/-) in Independent India.  It refers to a social security provision made by the Government of India under the Employees' State Insurance Act, 1948 (ESI Act) to counterbalance or negate the physical or financial distress resulting from certain health related eventualities that the workers are generally exposed to, such as sickness, maternity, temporary or permanent disablement, occupational disease or death due to employment injury, resulting in loss of wages or earning capacity-total or partial.

ESI is, aimed at upholding the human dignity in times of crises through protection from deprivation, destitution and social degradation while enabling the society the retention and continuity of a socially useful and productive manpower. 

The ESI Scheme is financed by contributions from employers and employees. The rate of contribution by employer is 4.75% of the wages payable to employees. The employees’ contribution is at the rate of 1.75% of the wages payable to an employee.

Full medical care is provided to an Insured person and his family members from the day he enters insurable employment. There is no ceiling on expenditure on the treatment of an Insured Person or his family member. Medical care is also provided to retired and permanently disabled insured persons and their spouses on payment of a token annual premium of Rs.120/-. Apart from sickness, disablement, medical, maternity and dependants’ benefits, other benefits provided to the beneficiaries include confinement expenses, funeral expenses, vocational rehabilitation, physical rehabilitation, unemployment allowance and skill up gradation & training.  Details may be seen here. The benefits provided to the employees under the Act are also in conformity with Conventions of International Labour Organisation (ILO).

An interesting feature of the ESI Scheme is that the contributions are related to the paying capacity as a fixed percentage of the workers’ wages, whereas, they are provided social security benefits according to individual needs without distinction.

This social security programme is administered by an apex corporate body called the Employees' State Insurance Corporation (ESIC) alongside various state governments. ESIC operates through a network of 52 Regional, Sub- Regional and Divisional Offices located in various States. The list of dispensaries under ESIC may be seen here. As on February 2014[1] there are 151 hospitals in different parts of the country of which 116 hospitals are run by State Governments and 35 run directly by the ESIC. Further, ESIC has recently taken over the administration of 23 ESI Hospitals in various States for developing them as ESIC Model Hospitals. 


The promulgation of Employees' State Insurance Act, 1948 (ESI Act) by the Parliament was the first major legislation on social Security for workers in independent India. The scheme was inaugurated in Kanpur on 24 February 1952 (which is now celebrated as ESIC Day) by the then Prime Minister Pandit Jawahar Lal Nehru, with a simultaneous launch in Delhi. The initial coverage for both the centres was 1, 20,000 employees. The first prime Minister was the first honorary insured person of the Scheme and the declaration form bearing his signature is kept at ESI Corporation. The predecessor of this scheme was launched during British days in 1944.

Applicability and Coverage

The ESI Scheme applies to factories (including government factories) and other establishments viz. Road Transport, Hotels, Restaurants, Cinemas, Newspaper, Shops, Educational/Medical Institutions wherein 10 or more persons are employed[2]. However, in some States threshold limit for coverage of establishments is still 20. ESI Scheme will not apply to a factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act.

Employees of the notified categories of factories and establishments, drawing wages up to Rs. 15000/- a month, are entitled to social security cover under the Act.

State / Central Government can notify the type of establishments to be covered under the Scheme. On 16 July 2015, construction site workers were brought under the ESI Scheme thereby enabling them to avail benefits of complete medical care.

As on 31.3.2015, the ESI scheme covers 2.03 crore Insured persons, 1.79 crore employees, 7.89 crore beneficiaries, 0.29 cr. insured women, and 7.23 lakh employers in 830 industrial or commercial clusters spread over 393 districts[3]. ESIC is now providing the entire range of benefits from Primary health care to super specialty.

Reforms in 2015

Registration of the employers with ESIC can now be done through e-Biz portal. ESI Contribution can also be paid online. Further, a series of second generation reforms are being carried out since 2015 under the brand name “ESIC-2.0” details of which may be seen here.

1. Source: PIB release of Ministry of Labour and Employment dated 10 February 2014

2. The Act further absolved the employers of their obligations under the Maternity Benefit Act, 1961 and Workmen's Compensation Act 1923.

3. Source: ESIC

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