Employees State Insurance Act, 1948: formula sheet

Key formulas

Objective of the scheme

Contributions (employer + employee) → ESI Fund → medical care + cash benefits

Benefits cover sickness, maternity, employment injury and death-related dependants' benefit.

Governing law

ESI Act, 1948 (original statute) → Code on Social Security, 2020, Chapter IV (ESI provisions)

Answer on the Code's Chapter IV. Mention the 1948 Act as the original statute. Do not say it is repealed unless your study material states it.

Coverage test

Covered unit + employee within the wage limit = insured person

The headcount and wage limit are set by law and notification, not by the Code text checked here. Use the figure given in the question or in the latest study material.

Grant of exemption (Code, section 143(1) and (4))

Notification by appropriate Government + prior consultation with the Corporation (Chapter IV) + employees get substantially similar or superior benefits

If the benefits are not substantially similar or superior, exemption cannot be granted.

Period of exemption (Code, section 143(3))

Initially 3 years from publication of the notification; may be extended

The extension is for the period the Central Government prescribes. The 3 years is only the initial period.

Cancellation (Code, section 143(7) and (8))

Failure to comply with conditions → exemption may be cancelled → surplus, reserves and employees' accumulations go to the statutory fund

The transfer is made within the time and manner given in the conditions for exemption.

Surrender (Code, section 143(9))

Board of trustees' resolution → employer's application → Government allows contributions to statutory funds from the date specified → cancellation → transfer of accumulations

The transfer is made within the time and manner notified by the appropriate Government.

Constitution of the Corporation

Central Government constitutes the Corporation by notification, from the date specified (Section 5(1))

Purpose: Chapter IV and related provisions, and their administration.

Members of the Corporation

Chairperson 1 + Vice-Chairperson 1 + Central Government officials (not more than 5) + one for each State + one for Union territories + employers' representatives 10 + employees' representatives 10 + medical profession 2 + Members of Parliament 3 + Director General (ex officio)

Chairperson and Vice-Chairperson are appointed by the Central Government. Employer, employee and medical members are appointed in consultation with recognised organisations.

Parliament members

3 = 2 Lok Sabha + 1 Rajya Sabha

Elected respectively by the members of the House of the People and the Council of States.

Legal status

Body corporate + perpetual succession + common seal + can sue and be sued (Section 5(2))

Name: Employees' State Insurance Corporation.

Standing Committee

Constituted by the Central Government by notification, from amongst the members of the Corporation (Section 5(3))

Works subject to the general superintendence and control of the Corporation.

Functions of the Standing Committee

(a) administers the Corporation's affairs and may exercise its powers; (b) must submit matters specified in regulations to the Corporation; (c) may submit any other matter at its discretion (Section 5(4))

Clause (b) is mandatory, clause (c) is discretionary.

Medical Benefit Committee

Constituted by the Central Government by notification, with composition as specified, to assist the Corporation and the Standing Committee on medical benefits (Section 5(5))

Its duties and powers are as prescribed by the Central Government.

Other committees and tenure

Corporation may constitute committees by order (Section 5(6)); a member continues in office after tenure expires until a successor is appointed (Section 5(7) proviso)

Terms and tenure of Corporation and Standing Committee members are as prescribed.

Components of contribution

Contribution = Employer's contribution + Employee's contribution

Both are paid to the Corporation. Rates are prescribed by the Central Government.

Due date

Due on the last day of the wage period

For part-period employment or two or more employers in one wage period, the due date is as specified in the regulations.

Interest on delay (1948 Act, section 39(5))

Interest = Contribution × 12% × (time of delay in years)

Simple interest at 12% per annum or a higher rate set by the regulations, up to the date of payment. The higher rate cannot exceed a scheduled bank's lending rate.

Employee's contribution exemption (1948 Act, section 42(1))

Average daily wages < prescribed wages ⇒ no employee's contribution

The employer's contribution is still payable.

Recovery from employee

Only the employee's share, only by deduction from wages

No deduction for the employer's share. Deduction only for the relevant period and not above the employee's contribution for that period.

Recovery from contractor

Employer recovers employer's share + employee's share from the contractor

By deduction from sums payable under the contract or as a debt. Under the 1948 Act, the principal employer recovers from the immediate employer (section 41).

Deposit before dispute in Court

Deposit = 50% of the amount claimed by the Corporation

Code on Social Security, 2020, section 49(2). The Court may waive or reduce it for reasons recorded in writing.

Six benefits (section 46 of the ESI Act; section 32 of the Code)

Sickness + Maternity + Disablement + Dependants' + Medical + Funeral expenses

Cash benefits are periodical payments for the first four. Medical is treatment. Funeral expenses are paid to the eldest surviving family member, or else to the person who actually incurs the funeral expenditure.

No double benefit for the same period (section 65 of the ESI Act; section 41(4) of the Code)

Not both: sickness + maternity; sickness + temporary disablement; maternity + temporary disablement

If entitled to more than one, the person chooses which one to receive (section 65(2) of the ESI Act; section 41(5) of the Code).

Conditions for sickness or disablement benefit recipients (section 64 of the ESI Act)

Stay under treatment; do nothing to retard recovery; do not leave the treatment area without permission; allow medical examination

Applies to sickness benefit and disablement benefit other than benefit granted on permanent disablement.

Funeral expenses claim

Claim within 3 months of death (extendable); amount ≤ prescribed limit

Paid to the eldest surviving family member, else to the person who actually incurs the expense.

Medical benefit period (section 56(3) of the ESI Act)

Entitled while contributions are payable, or while qualified for sickness or maternity benefit, or in receipt of disablement benefit that does not disentitle

Family can get it only where medical benefit is extended to the family.

Cash benefit on death (section 41(6) of the Code)

Unpaid cash benefit up to and including the day of death goes to the nominee, else the heir or legal representative

Nomination must be in writing in the form specified by regulations.

Constitution of ESI Court (Section 74)

State Government + notification → ESI Court with one or more judges

The judge is a judicial officer or a legal practitioner of the prescribed standing. The Corporation does not constitute it.

Matters decided by ESI Court (Section 75)

Status + wages + contribution rate + principal employer + benefit right + recovery claims

Learn the two groups: questions about person and benefit, and money disputes between employer, Corporation and others.

Bar on civil courts (Section 75)

Matter within ESI Court / Medical Board / Medical Appeal Tribunal → no civil court jurisdiction

The bar applies only to matters the Act assigns to these bodies.

Medical questions

Medical Board → Medical Appeal Tribunal

Disablement and similar medical issues follow this track, not the ESI Court track.

Appeal from ESI Court (Section 82)

Appeal to High Court only if substantial question of law; time limit 60 days

No appeal against an order passed by consent. Delay can be condoned under the Limitation Act provisions.

Section 133(i)(a): deducted employee contribution not paid

Offence under clause (a), employee's contribution deducted but not paid: imprisonment at least 1 year, up to 3 years, plus fine of ₹1,00,000

The court may impose a lesser term for adequate and special reasons recorded in the judgment.

Section 133(i)(b): any other failure to pay contribution

Clause (a), any other case: imprisonment at least 2 months, extendable to 6 months, plus fine of ₹50,000

Same proviso allows a lesser term for special reasons recorded.

Section 133(ii): gratuity not paid

Clause (g): imprisonment up to 1 year, or fine up to ₹50,000, or both

Applies to failure to pay gratuity due under the Code.

Section 133(iii): imprisonment or fine band

Clauses (d), (f), (i), (k), (l), (o): imprisonment up to 6 months, or fine up to ₹50,000, or both

Covers penalising a woman employee, obstructing officers, no maternity benefit, not producing records, unpaid building workers' cess, dishonest false return.

Section 133(iv): fine only band

Clauses (b), (c), (e), (h), (j), (m), (n), (p), (q): fine up to ₹50,000

Includes deducting employer's contribution from wages, reducing wages, not filing returns, not paying compensation, residuary contraventions.

ESI Act Section 84: false statement

Imprisonment up to 6 months, or fine up to ₹2,000, or both

Knowingly false statement for the purposes stated in the section. A convicted insured person loses cash benefit for a prescribed period.

Code Section 104: cess arrears

Penalty not exceeding the amount of cess in arrears

Imposed only after a reasonable opportunity of being heard. No penalty if default was for good and sufficient reason.

Code Section 153: transition

Old bodies continue until the Code's bodies are constituted or the old term expires, whichever is earlier

Covers the ESI Corporation, Medical Benefit Council and Standing Committee, among others.

Quick revision

• The Act set up the Employees' State Insurance Corporation as a body corporate with perpetual succession, a common seal, and the power to sue and be sued.
• The Corporation's powers stand with the Standing Committee and the Medical Benefit Council, each with its own role.
• All contributions and other money received for the Corporation go into the Employees' State Insurance Fund, held and administered by the Corporation.
• The Corporation may accept grants, donations and gifts from governments, local authorities and individuals or bodies.
• Under the Code, the Fund's money is deposited in banks approved by the Central Government and invested as the Central Government prescribes.
• Under the Code, the Fund may be spent only on listed purposes, such as benefits, medical treatment, hospitals, audit costs and staff salaries.
• Under the Code, user charges from other beneficiaries are treated as contributions.
• The Code on Social Security, 2020 repeals the Employees' State Insurance Act, 1948.
• Actions taken under the repealed Act are saved and treated as done under the matching provisions of the Code.
• Rules, regulations and schemes under the old Act stay in force for one year from the Code's commencement, to the extent they do not conflict with the Code.
• Existing bodies like the Corporation and the Standing Committee continue until their Code counterparts are constituted or their term under the old law ends, whichever is earlier.

Common mistakes

• Answering only on the ESI Act, 1948 and ignoring the Code. Fix: Use the Code on Social Security, 2020 (Chapter IV) for the ESI provisions. Mention the 1948 Act as the original statute, and do not state that it is repealed unless your study material says so.
• Assuming an exemption is granted just because the employer asks for it. Fix: Under section 143, exemption needs a notification, prior consultation with the Corporation for Chapter IV, and employees who already get substantially similar or superior benefits.
• Saying the ESI Corporation is created under the ESI Act, 1948 only, without the Code. Fix: Cite Section 5 of the Code on Social Security, 2020, and mention that the Act's subject is now in the Code.
• Giving wrong numbers of employer, employee or medical members. Fix: Learn: employers 10, employees 10, medical profession 2, Members of Parliament 3.
• Saying the employee pays the employee's share directly to the Corporation. Fix: The employer pays both shares and recovers the employee's share by deducting it from wages.
• Deducting the employer's share from wages when the contract allows it. Fix: The Code (section 31(3)) bars it notwithstanding any contract to the contrary.
• Giving disablement or dependants' benefit for any injury or death. Fix: Both benefits need an employment injury sustained as an employee under the Act. A death from illness gives funeral expenses, not dependants' benefit.
• Allowing sickness benefit and maternity benefit together for the same period. Fix: Section 65 bars this. She chooses one for that period.
• Saying an appeal from the ESI Court lies on any ground, including facts. Fix: Remember the filter: High Court, substantial question of law only.
• Sending a medical question such as degree of disablement to the ESI Court. Fix: Keep two tracks in mind: Medical Board and Medical Appeal Tribunal for medical questions, ESI Court for the Section 75 matters.

Exam tips

• Start every answer by naming the Code on Social Security, 2020 (Chapter IV) as the law carrying the ESI provisions. Call the 1948 Act the original statute if you mention it.
• Learn section 143 as a list: power, consultation, substantially similar or superior benefits, three-year initial period, cancellation, surrender. These are tested as one-line MCQs and short notes.
• Treat headcount and wage limit figures as notified values. Use the figure in the question, or the latest study material, and never from memory.
• For defined terms, write the definition from your study material, then apply it to the facts in one line.
• In a 14-mark answer, start with the objective, then coverage, then definitions or exemption, and keep each in a short paragraph or bullet.
• Watch the words substantially similar or superior. They decide whether an exemption can be granted under section 143(4).
• Short notes and 14-mark parts often ask for composition. Write it as a numbered list with the figures.
• MCQs test numbers such as 10 employer members, 10 employee members, 2 medical members and 3 MPs. Check them against your list.