Let us take the issue like this. All employers are liable to compensate employees irrespective of their salary to compensate any loss caused to the employees by way of accidents during the course of business. It shall also include compensation resulting in death or permanent disablement. The compensation will be worked out considering the loss of income due to disablement or death and as such it will certainly be linked to his monthly wages and of course the age of the employee. Similarly, the the higher the wages the higher will be the compensation and the younger the employee the higher will be the loss of income to the family and accordingly, the amount of compensation will be higher for a young person than an older one.
Now inorder to reduce heavy financial burden or avoid depletion that may take place to his working capital, a genuine employer will go for insurance. In such situation it will be the insurance company who will pay compensation to deceased employee's legal heirs. The insurance company has two conditions, viz, there should be a ceiling to the salary and compensation will be worked out considering this ceiling.
Yes, we have a ceiling that the maximum salary for the purpose of calculating workmen's compensation should be Rs 8000 per month. But any person irrespective of salary can be insured against the employment injuries
Now this insurance company's role is taken over by ESI Corporation. The ESIC has one condition, that is the Corporation will take care of compensation payable to persons whose salary do not exceed Rs 21000. That means ESI Corporation will absolve the employer's liability of payment of workmen compensation in respect of employees who are getting wages not more than Rs 21000. Now the employer is left with employees drawing more than Rs 21000. For their coverage he has to approach some other insurers. It is upto the employer whom to be contacted, Insurance company A or B or C.
Having passed ESI Act, the coverage of employees of certain wage limit (Rs 21000 or less) having become mandatory, the employer has no other option but to go for the insurance offered by the ESIC. Very simple, for the rest of the employees who are not covered under ESI, he has to go for some other insurance company.
The company may be covered by ESI Act, it is not mandatory that all the employees should also be covered automatically but only those who have salary ceiling prescribed by the ESIC will only be covered by ESI schemes. It is not "many companies" who take policy to cover employees whose salary exceed Rs 21000, it should be "all companies" should take policy to cover the employees whose salary exceed Rs 21000. You should see the Workmen's Compensation Act first and then see in respect of some employees (those whose salary is not more than Rs 21000) the company's liability under the Employees Compensation Act is shifted to ESI Corporation.
12th February 2018 From India, Kannur