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Employees' State Insurance Act, 1948... Synopsis



The Act applies to all factories (including Government factories but excluding seasonal factories)

  • employing ten or more persons and carrying on a manufacturing process with the aid of power or
  • employing 20 or more persons and carrying on a manufacturing process without the aid of power and
  • such other establishments as the Government may specify.
  • Shops employing 20 or more persons.
    Every employee (including casual and temporary employees), whether employed directly or through a contractor, who is in receipt of wages up to Rs. 7,500 p.m. is entitled to be insured under the E.S.I. Act.


The employer is required to contribute at the rate of 4.75% of the wages paid/payable in respect of every wage period. The employees are also required to contribute at the rate of 1.75% of their wages except when the "average daily wages in a wage period" are equal to or less than Rs. 40. It is the principal employer’s responsibility to deposit his own as well as employee’s contributions in respect of all employees including the contract Labour, into the E.S.I. Account. Non-availability of funds cannot be a ground for non-payment of contributions under the Act. There is no provision to waive the contribution, damages and interest.

The employer should get his factory or establishments registered with the E.S.I. Corporation within 15 days after the Act becoming applicable to it, and obtain the employer’s Code Number. Application (Employer’s registration form) shall be made in form 01. After having been satisfied with the application form, the regional office will allot a code number to the employer, which must be quoted in all documents and correspondence.

The employer should obtain the declaration from the employees covered under the Act and submit the same along with the return of declaration forms, to the E.S.I. office. The appropriate office shall make allotment of Insurance Numbers to the employees and issue them temporary identification certificate/ Identity Cards. The employer should deposit the employees’ and his own contributions to the E.S.I. Account in the prescribed manner. The amount of contributions should be paid into the ESI Account with an authorised branch of State Bank of India, through an ESI challan in quadruplicate on or before the 21 st of the month following the calendar month in which the wages fall due. The employer should furnish a Return of Contributions along with the challans of monthly payment. The employer should not reduce the wages of an employee on account of the contribution payable by him. The employer must not put to work any sick employee and allow him leave, if he has been issued the prescribed certificate.






The Act envisages six types of benefits to insured persons and /or their family. None of these benefits are transferable, attachable or assignable. They are also not commutable.


Modes of recovery

Inspectors appointed under the Act have the power to require the principal employer to furnish such information as may be required and may examine the books of accounts and other documents relating to the employment of persons and payment of wages etc, and shall where no returns, registers or records are maintained or if the inspector is prevented from exercising his functions then the corporation may on the basis of information available with it determine the amount of contribution payable. Authorised officer shall include Director General, Insurance commissioner, Joint Insurance Commissioner, Regional Director. In respect of arrears due under the Act, the authorised officer may issue certificate to the recovery officer who shall proceed to recover the amount specified therein and may resort to any one of the modes.

  1. Attachment and sale of the moveable or immoveable property of the factory. Property of the principal employer can also be attached and sold only if the sale proceeds of property of establishment are insufficient.
  2. Arrest of the employer and his detention in prison
  3. Appointing a receiver for the management of the moveable or immoveable properties of the establishment.

Any dispute arising under the Act shall be decided by the Employees Insurance Court and not by a Civil Court. Prosecution under this Act shall not be instituted except by or with the previous sanction of the Insurance Commissioner or of such other officer of the corporation as may be authorised. No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the First Class shall try any offence under this Act.

Offences by companies

If the person committing an offence under this Act is a company, every person, who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Such person shall not be liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. Where an offence under this Act has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.


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