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This in response to many queries received from our clients on the cited subject.
The Employee State Insurance Act, 1948 applies to an employee who is drawing a monthly wage of Rs. 21,000/- or below. However, under rule 50 of the ESI (Central) rules 1950, it provides that in case of an employee who is person with disability under the persons with Disabilities (Equal Opportunities Protection of Rights and Full Participation) Act,1995 (1 of 1996), and under the National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act. 1999 (44 of 1999) respectively, shall be Rs. 25,000/- per month
Our suggestion consists of two parts:
- Any employee who is not covered by ESI, by default gets covered under the Employees Compensation Act 1923-subject to that the employee is covered under Schedule II which spells out details the definition of an employee for coverage. However, this legislation limits the liability of the employer to cash compensation only and does not include Medical treatment as provided under ESI. Many insurance companies provide an insurance policy specifically to cover the risk under the EmployeesCompensationAct,1923. Dependinguponthefinancialliability,anemployercanopt for this insurance as the Employer is always legally liable to pay the compensation to the employee who is not covered by ESI, but covered by Employee Compensation Act. By taking any other variety of insurance policy, does not exempt the employer from the liability under the Employee Compensation Act 1923.
- Many companies extend insurance coverage to employees not covered by ESI, by two policies – Group personal accident policy and Group Mediclaim policy. To repeat, the liability of the employer continues under the Employees Compensation Act, 1923. In our opinion, for employees who are coming out of ESI coverage, the employer should offer insurance coverage to such employee with the clear understanding that the premium payable by the employer will be restricted to the employer contribution under ESI i.e. Rs. 21000*3.25% = 682.5 per month. The employee can be advised to take an insurance policy to his liking with the understanding that employers’ contribution will be restricted to Rs.682.5 per month or Rs.8190 per annum. If the company decides depending upon their financial capacity instead of stopping at Rs. 682.50 paisa per month they agree to pay 3.25% on their latest salaries.
To safeguard the interest of the company, an insurance Employee compensation policy is a must. While it is the choice of the Employer to take a Group Mediclaim and /or limit the premium payable is in the name of the employee to the outflow, if they were to have cover under ESI Act.