Employees State Insurance Corporation: Roles and Objectives

calendar11 Apr, 2022
timeReading Time: 4 Minutes
Employees State Insurance Corporation: Roles and Objectives

Employees State Insurance Corporation is a government-backed institution that falls under ESI Act, 1948. It is liable for the management of the ESI scheme. The ESI scheme refers to a worker welfare scheme that safeguards employees against financial crises arising out of medical conditions or death.

The ESIC is headquartered in New Delhi. Besides, it has 23 regional and 26 sub-regional offices operating in the states. Apart from that, it has over 800 local offices pan India to ensure seamless implementation of the ESI scheme. Specialized institute like Medical Benefit Council acts as an advisor for Employees State Insurance[1] Corporation.

ESI Scheme Applicability

  • The ESI Act covers all non-seasonal production facilities having ten or more workers. The state government has broadened the scope of Section 1(5) of the Act. The establishments like a hotel, commercial outlets, cinemas, publication houses, and private medical institutions are now covered under the said section. Further, it is also encompasses Municipal Corporation/Municipal Bodies having ten or more workers in certain State/Union Territories.
  • The Central Government has broadened the scope of Section 1(5) of the Act to encompass the following establishments under its belt.
  • Newspaper establishments
  • Restaurants
  • Hotels
  • Port Trust
  • Insurance Business
  • Non-Banking Financial Companies
  • Airport Authorities
  • Warehouse having 20 or more workers

The present wage threshold for establishments under the ESIC Act is Rs 21,000/month (Rs 25000/month in case of individuals with disability)

Notable highlights of the ESI scheme

  • Complete medical care is facilitated by the ESI scheme to the worker registered under the said Act at the time of his/her incapacity, restoration of his/her health & working capacity.
  • During absenteeism triggered by illness, maternity or work injuries resulting in loss of salaries, the relevant financial aid is provided to the workers to reimburse the wage loss.
  • The scheme facilitates medical facilities for concerned family members also. As of 31 Mar 2019, 3.14 crore workers are encompassed under this scheme, with the total no. of beneficiaries summing up to 13.3 crores.
  • Generally, the benefits available under this scheme are classified under two categories:
  • Cash benefits (which include maternity, illness, disablement (temporary and permanent), rehabilitation allowance, funeral expenses, medical bonus and vocational rehabilitation Non-cash benefits via medical facility.
  • The scheme is contributory and self-financing in nature. The funds under the ESI scheme are mainly collected via employers’ and workers’ contributions payable per month at a fixed % of wages paid.
  • Presently, the employee contribution rate has been capped at 0.75 per cent of the wages. Likewise, the rate for employers is 3.25 per cent of wages paid.
  • The employer is liable to contribute from this share in favour of those serving employees whose daily wage is around Rs 137 as these workers are exempted from this own contribution.
  • The employer is mandated to pay his/her contribution and deduct workers’ contribution from wages and deposit with ESIC within 15 days from the calendar’s last day in which the contribution falls due.
  • The payment can either be electronically or via authorized public sector banks.

ESIC Contribution Rates mentioned under ESIC Act

ESIC contribution rates (Reduced with effect from 01/July/2019
Particulars Current Rate (%) Reduced Rate (%)
Employer Share 4 3.25
Employee Share 1 0.75
Total 5 4

Common queries around Employees State Insurance Corporation and the ESI scheme

What are the common benefits of the ESI scheme from an employees’ standpoint?

The ESI scheme facilitates medical facilities for the workers falling under the ESIC Act during the period of his/her incapacity.

It also ensures the availability of financial aid to reimburse wage losses triggered by absenteeism due to certain medical conditions and injury. The scheme also renders medical care to the employee’s family members.

Who is accountable for handling the affairs of the ESI scheme?

The ESI scheme is managed by a government institution known as Employees State Insurance Corporation. It comprises members from different government backgrounds.

The Director-General of the Employees State Insurance Corporation has the designation of chief executive officer and an ex-officio member.

How does ESIC arrange funds to operate the ESI scheme?

The ESI scheme is contributory and self-financing in nature. The ESIC arranges the ESI fund via monthly contributions from the employers and workers. Such contributions are made out of wages paid at a standard percentage. The state governments also contribute 1/8th share of the expenses of medical benefits.

Which type of establishment falls under the ESI scheme?

The Central Government released a notification that states that all factories where ten or more workers are hired shall fall under the ESI scheme. Following is the list of establishments is covered under the ESI scheme in light of said notification:

  • Shops
  • Hotels or restaurants only engaged in ‘sales.’
  • Road motor transport establishments
  • Cinemas, including preview theatres
  • Newspaper publication
  • All private educational institutions and medical institutions

Who is accountable for fixing the contribution rate of the ESI scheme?

The GOI formulates, re-formulates, and underpins the contribution rate for the ESI scheme. The rates are re-formulated from time to time. In 2019, the GOI reduced the workers’ contribution rate by 0.25 per cent, which came into effect on 01/06/2019.

Is ESIC serves as a mandate for all employees?

Yes. All the establishments falling under the ESI Act and all production facilities that employ more than ten workers and pay wages lower than Rs 21,000/month (Rs 25000 for workers having a disability) must register under ESIC Act and make a prescribed contribution towards the scheme. All the employees earning a salary of more than Rs 21,000/month has been put outside the ambit of this scheme.


Employees State Insurance Corporation works for the welfare and empowerment of millions of workers serving organized and unorganized sector. Their scheme, i.e. ESI scheme, empowers workers to get back on track and have access to necessary aid during testing times.  The scheme also facilitates much-needed medical care for those who received injuries during work.

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