Labour Laws and Practice · Social Security Legislations

Employees' State Insurance and Medical Benefits under the Code

Updated 11 October 2026 · Fact-checked

Employees' State Insurance (ESI) under the Code on Social Security, 2020 is a fund-based scheme run by the Corporation. Contributions go into the ESI Fund. Insured Persons get sickness, maternity, disablement, dependants', medical and funeral benefits. Disputes go to the Employees' Insurance Court. In answers, state the provision, apply the facts, then conclude.

Understand Employees' State Insurance and Medical Benefits

Employees' State Insurance is social insurance. Employer and employee pay contributions into a common fund. When the employee falls sick, is injured at work, or dies from an employment injury, the fund pays cash and medical help. The Code on Social Security, 2020 places this scheme in its ESI chapter.

The Employees' State Insurance Fund is central. Under section 25, all contributions and user charges paid under the chapter, and all other money received on behalf of the Corporation, are paid into it. The Corporation holds and administers it. The Corporation may also accept grants, donations, Corporate Social Responsibility Fund and gifts from governments, local authorities or any individual or body. Money is deposited in banks approved by the Central Government, and the fund is deposited or invested in the manner the Central Government prescribes.

Section 32 lists the benefits. These are sickness benefit, maternity benefit, disablement benefit, dependants' benefit, medical benefit and funeral expenses. The first four are periodical payments. Medical benefit is treatment and attendance. Funeral expenses go to the eldest surviving member of the family, or to the person who actually bears the cost if the Insured Person had no family or was not living with the family. The Corporation may extend medical benefit to the family of an Insured Person, subject to regulations.

Medical treatment is delivered mainly through State Governments under section 40. The State Government provides reasonable medical, surgical and obstetric treatment to Insured Persons, and to their families where the benefit is extended. The Corporation can also run its own hospitals and dispensaries, contract with local authorities, private bodies or individuals, and commission ESI hospitals through third party participation.

Disputes about who is an employee, wages, contributions, employer identity and entitlement to benefit go to the Employees' Insurance Court under section 49. Civil courts have no jurisdiction on these matters.

Key rules to remember

Benefits (section 32): Sickness + Maternity + Disablement + Dependants' + Medical + Funeral expenses; Six benefits. The first four are periodical payments. Qualification, rate and period of the cash benefits are prescribed by the Central Government.
Funeral expenses: Claim within 3 months of death; amount capped as prescribed by the Central Government; The Corporation or its authorised officer may allow an extended period.
Employer dispute deposit (section 49(2)): Deposit = 50% of the amount claimed by the Corporation; Needed before an employer raises a contribution or dues dispute in the Court. The Court may, for reasons recorded in writing, waive or reduce it.
Sickness benefit cost sharing (section 40(2)): Excess over all-India average incidence is shared between the Corporation and the State in the agreed proportion; The Corporation may waive the whole or part of the State's share.
Failure to agree (section 40(4)): No agreement → arbitrator appointed by the Central Government in consultation with the State Government; The arbitrator decides the nature and extent of treatment and the cost-sharing proportion.
Civil court bar (section 49(3)): No Civil Court jurisdiction over matters decided by a medical board, medical appeal tribunal or the Employees' Insurance Court; Quote this at the end of any dispute answer.

How to solve Employees' State Insurance and Medical Benefits questions

Use this method for any written question on ESI, whether it asks for benefits, medical provision or disputes.

1Identify what the question tests: the fund, a benefit, medical treatment arrangements, or a dispute forum.
2Name the Code and the matching section: section 25 for the fund, 32 for benefits, 40 for medical treatment, 49 for disputes.
3State the rule in plain words with its exact conditions, such as certification, family extension or the 3-month funeral claim.
4Apply the rule to the facts: who is the Insured Person, what happened, who is claiming, and whether the time limit is met.
5Mention that rates, qualifying conditions and periods are prescribed by the Central Government where the Code says so; do not invent figures.
6Conclude clearly with the benefit payable or the forum, and add a practical compliance point such as record keeping or deposit.

Quickest way: Four-label method

When to use it: When you have under ten minutes for a short or case-based question.

Label the issue: Fund, Benefit, Medical or Dispute.
Write the section number and one-line rule.
Add one fact-based sentence applying it.
End with a one-line conclusion and the Court or State role if relevant.

Common mistakes in Employees' State Insurance and Medical Benefits

Writing exact contribution rates or wage ceilings as if fixed in the Code.
Students carry over figures from the old ESI Act or from memory.
Fix: Say that qualification, rate and period of benefits are prescribed by the Central Government, and use rates only if the question gives them.
Saying the Corporation alone provides medical treatment.
The word Corporation dominates the topic.
Fix: State that the State Government provides treatment under section 40(1), while the Corporation can also set up hospitals and contract with others.
Treating funeral expenses as a benefit to the Insured Person's nominee in all cases.
Confusion with other death benefits.
Fix: The payment goes to the eldest surviving member of the family, or the person who actually incurs the expenditure if there is no family or the Insured Person was not living with it.
Missing the 50% deposit before an employer disputes dues in the Employees' Insurance Court.
Students focus on the forum, not the precondition.
Fix: Always add that the employer must deposit fifty per cent of the amount claimed, unless the Court waives or reduces it for recorded reasons.
Advising a civil suit for a benefit claim.
General dispute habit.
Fix: Cite section 49(3): civil courts have no jurisdiction on these matters; go to the Employees' Insurance Court.
Confusing maternity benefit under ESI with the employer-paid maternity benefit chapter.
Both use the term maternity benefit.
Fix: Under section 32, ESI maternity benefit is periodical payment to an Insured Person who is a woman, certified eligible by the authority specified in regulations.

Worked examples

Example 1

Sunita, an Insured Person employed with a Pune manufacturer, is absent due to illness certified by a duly appointed medical practitioner. Her employer says ESI does not apply to her sickness. Advise on her entitlement and the source of payment.

Show the solution

Issue: whether sickness leads to a benefit under the ESI chapter.
Rule: section 32(1)(a) entitles an Insured Person to periodical payments in case of sickness certified by a duly appointed medical practitioner, or another person with qualifications the Corporation specifies by regulations. This is sickness benefit.
Application: Sunita is an Insured Person and her illness is certified by a duly appointed medical practitioner, so the certification condition is met.
Qualification, rate and period are as prescribed by the Central Government under section 32(3), subject to those conditions.
Payment comes from the Employees' State Insurance Fund under section 25, which holds contributions and is administered by the Corporation.

Answer: Sunita is entitled to sickness benefit, paid from the ESI Fund, subject to the conditions, rate and period prescribed by the Central Government. The employer's objection fails. A dispute on her right to benefit goes to the Employees' Insurance Court.

Example 2

Rao Textiles Ltd. receives a demand of ₹8,00,000 from the Corporation for contributions. It disputes the demand and wants to approach the Employees' Insurance Court. What must it do first, and can it go to a civil court instead?

Show the solution

Issue: precondition and forum for an employer dispute about contributions.
Rule: under section 49(1), disputes on contributions and dues between an employer and the Corporation are decided by the Employees' Insurance Court.
Section 49(2): the employer must first deposit with the Court fifty per cent of the amount claimed by the Corporation.
Calculation: 50% of ₹8,00,000 = ₹4,00,000.
The Court may, for reasons recorded in writing, waive or reduce the deposit.
Section 49(3): no Civil Court has jurisdiction over such a dispute.

Answer: Rao Textiles must deposit ₹4,00,000 with the Employees' Insurance Court before raising the dispute, unless the Court waives or reduces it for recorded reasons. A civil court cannot hear the matter.

Exam tips

Learn the six benefits of section 32 as a list and write each with its one-line condition.
In medical benefit answers, separate the State's role (section 40(1)) from the Corporation's powers (sections 40(7) to (10)).
For dispute questions, give three points: Employees' Insurance Court, 50% deposit, civil court bar.
Do not quote rates or wage limits unless the question supplies them; say they are prescribed.
Keep the provision, analysis and conclusion layout, and add a short compliance point such as keeping contribution records.

Practice questions from Social Security Legislations

Employees' State Insurance and Medical Benefits in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Employees' State Insurance and Medical Benefits: frequently asked questions

What benefits does an Insured Person get under the Code on Social Security, 2020?

Section 32 gives sickness, maternity, disablement, dependants', medical benefit and funeral expenses. The first four are periodical payments. Qualification, rates and periods are prescribed by the Central Government.

Who provides medical treatment under the ESI chapter?

The State Government provides reasonable medical, surgical and obstetric treatment to Insured Persons, and to families where the benefit is extended. The Corporation may also run hospitals, enter agreements with private bodies, and commission hospitals through third party participation.

What happens if the State and the Corporation cannot agree on medical arrangements?

An arbitrator decides the nature and extent of treatment and the cost-sharing proportion. The Central Government appoints the arbitrator in consultation with the State Government.

Which forum decides ESI disputes?

The Employees' Insurance Court decides matters listed in section 49, such as whether a person is an employee, rate of contribution and right to benefit. Civil courts have no jurisdiction over them.