Understanding the Maternity Benefits Act: How Does It Protect Working Mothers?

MATERNITY BENEFITS ACT

Motherhood is a very special experience in a woman's life. It alters her lifestyle and requires her to make certain compromises. That is where the concept of maternity leave and the benefits it entails, comes in handy.

A woman needs to be able to give quality time to her child without having to worry about whether she will lose her job and her source of income.

The Maternity Benefits Act, 1961, gives her the assurance that her rights will be looked after while she is at home to care for her child.

Under this law, no employer can knowingly employ a woman in his establishment during the six weeks following the day of her delivery or her miscarriage. However, if the pregnant woman herself makes a request, she should not be forced to indulge in work of an arduous nature, or be forced to stand for long hours. Such work might adversely affect her pregnancy or health or the normal development of the foetus or cause a miscarriage.

Definitions

Certain definitions have been specified in the context of the Act. These are:

"child" includes a still-born child;

"delivery" means the birth of a child;

"employer" means -

A person appointed by the Government for the supervision and control of employees. In the absence of such an appointment, this person would be the head of the department or the chief executive officer of the local authority. The employer could also be the person who has the ultimate control over the affairs of the establishment.

"Establishment" stands for a factory, mine or plantation etc.

"miscarriage" means the expulsion of the contents of a pregnant uterus at any period prior to or during the twenty-sixth week of pregnancy but does not include any miscarriage, the cause of which is punishable under the Indian Penal Code.

"Wages" means remuneration paid or payable in cash to a woman and includes dearness and house rent allowance, incentive bonus and the money value of the concessional supply of food grains and other articles. It does include any other kind of bonus, overtime earnings, any contribution towards the pension fund or provident fund and any gratuity payable on the termination of service.

Who is entitled to maternity benefit?

Every woman is entitled to the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence immediately preceding and including the day of her delivery and for the six weeks immediately following that day.

The average daily wage is calculated on the basis of the amount payable to her for the days on which she has worked during the period of three calendar months immediately preceding the date from which she has absented herself on account of maternity, or one rupee a day, whichever is higher.

To be eligible for maternity benefit, a woman should have worked in an establishment for not less than 160 days in the twelve months immediately prior to the date of her expected delivery.

The maximum period for which any woman can be entitled to maternity benefit is twelve weeks.

This includes six weeks up to and including the day of her delivery and six weeks immediately following that day. If a woman dies during this period, the maternity benefit will be payable only for the days up to and including the day of her death. However, if she delivers a child and dies during the delivery or during the period of six weeks following the delivery, the employer will be liable for the maternity benefits of the entire period of six weeks immediately following the day of her delivery. If the child dies during this period, the liability will be only up to and including the day of the death of the child.

In case the woman dies before receiving the benefit, the amount must be paid to her nominee or legal representative.

In the event of a miscarriage, the woman must produce relevant proof that she has suffered a miscarriage. This will entitle her to receive leave with wages at the rate of the maternity benefit, for a period of six weeks immediately following the date of the miscarriage.

Women who are ill on account of pregnancy, delivery, premature birth of a child or a miscarriage are also entitled to a period of absence or to leave with wages at the rate of maternity benefit for a maximum period of one month. However, they must submit proof of their illness.

Notice of claim for maternity benefit

A pregnant woman is required to give her employer a notice in writing, stating that the maternity benefit that she is entitled to should be given to her or any person nominated by her and that she will not be working during the period in which she receives the benefit. This notice should start from the date when she was absent from work, provided that date is not earlier than six weeks from the date of her expected delivery. This notice can also be given soon after the delivery.

On receiving the notice, the employer is bound to permit the woman to absent herself from work until the expiry of six weeks after the delivery.

In case a woman fails to give notice, this does not dis-entitle her from claiming maternity benefit. The employer is still liable to pay her the amount due to her.

Dismissal during absence on account of pregnancy

When a woman absents herself from work on account of illness during pregnancy, she may not be discharged or dismissed by her employer or issued notice for dismissal. It is equally unlawful for the employer to alter any of the conditions of her service to her disadvantage.

If she is discharged or dismissed from service, she should still be entitled to receiving maternity benefit or medical bonus. She cannot be deprived of these.

The woman can be dismissed only if she is guilty of gross misconduct. In this case, the employer is well within his rights to deprive her of the maternity benefit or medical bonus.

A woman who has been deprived of maternity benefit or medical bonus may, within sixty days from the date on which the order was communicated to her, appeal to the relevant authority. This authority has the final say on whether the woman should or should not be deprived of these benefits.

According to the law, if a woman continues to report to work during the period when she is entitled to maternity benefit, she forfeits her claim to the maternity benefit for the period. However, individual companies may allow the woman to take her leave as late as possible so that she may have more time to nurse the baby later on.

An employer who violates the provisions of the Maternity Benefits Act can be punishable with imprisonment up to three months or with fine up to five hundred rupees or both. Besides, if the violation is related to the non-payment of maternity benefit or any other amount, the court can recover this amount as if it is a fine and pay it to the aggrieved person.

The Maternity Benefits Act has a lot of provisions that are beneficial to the pregnant woman. It is up to the pregnant woman to find out what they are and to take advantage of them. The Act is a good example of the State taking its social responsibility very seriously.

Know - Did this give you some food for thought?

Regards

Arun K Mishra

A very good explanation was given for the Maternity Benefit Act. As a Labour Law student, this message is very useful. I would like to know some more details about the Industrial Disputes Act. Can you please email me the details to my email address: carol.g@rediffmail.com. This kind of information is necessary to know. Thanks for posting such valuable information. Keep up the good work.

--Caroline.

Dear Mr. Arun,

Thank you very much for this information. I have been working in a freight forwarding company for the past 2 years, and the strength of our organization is only 35. We have just started the PF, but ESI has not been initiated. In this situation, is a lady entitled to claim maternity benefits?

I am eagerly awaiting your valuable advice.

Regards, Nirmal

I think Maternity Benefit Act & ESI are different. Can we know much more about it, Mr. Arun.

-- Caroline.

Hi,

It is a nice article. But I have one small update in this: Eligibility for maternity benefit - a woman should have worked in an establishment for not less than 80 days in the twelve months immediately prior to the date of her expected delivery. Please correct me if I am wrong.

Best Regards,
Shivakumar

I am working on a part-time basis, that is, I go for 3 days a week. I am working in a Management Institute affiliated with a UGC-recognized university. I have been working there for the last 6 months on an Ad-hoc basis. I'll join full-time in Aug. My total working days are roughly 84 as of now. Will I be eligible for maternity benefits by June 2007? If I join full-time from Aug 2007, then by what time will I be eligible for maternity benefits? Thanks

Hi Caroline

Please find as desired by you.

Industrial Disputes Act

The object of the Act is to make provisions for investigation and settlement of industrial disputes. However, it makes other provisions in respect of lay off, retrenchment, closure etc. The purpose is to bring the conflicts between employer and employees to an amicable settlement. [The Act is achieving exactly opposite]. The Act provides machinery for settlement of disputes, if dispute cannot be solved through collective bargaining.

‘Industry' under Industrial Disputes Act – The definition of ‘industry' is as follows – ‘Industry means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft or industrial occupation or avocation of workmen. [section 2(j)]. Thus, the definition is very wide. - - The scope is much wider than what is generally understood by the term ‘industry'.

In Bangalore Water Supply & Sewerage Board v. Rajappa (1978) 2 SCC 213 = 36 FLR 266 = 1978(2) SCR 213 = 1978(1) LLJ 349 = AIR 1978 SC 548 (SC 7 member bench 5 v 2 judgment), a very wide interpretation to the term 'industry' was given. It was held that profit motive or a desire to generate income is not necessary. Any systematic activity organized by cooperation between employer and employees for the production and/or distribution of goods and services calculated to satisfy human wants and wishes is ‘industry'.

Thus, many hospitals, educational institutions, universities, charitable institutions and welfare organisations have got covered under the Act. Professions, clubs, cooperatives, research institutes etc. are also covered.

‘Industry Dispute' and ‘Workman' – The definition of ‘industrial dispute' and ‘workman' is as follows -

Industrial Dispute – Industrial dispute means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms and conditions of employment or with the conditions of labour, of any person. [section 2(k)]. - - Section 2A provides that dismissal, discharge, retrenchment of even a single workman will be ‘industrial dispute' even if no other workman or any union is a party to the dispute.

Workman – ‘Workman' means any person (including apprentice) employed in any industry to do any manual, clerical or supervisory work for hire or reward. It includes dismissed, discharged or retrenched person also. However, it does not include (i) Armed Forces i.e. those subject to Air Force Act, Army Act or Navy Act (ii) Police or employees of prison (iii) Employed in mainly managerial or administrative capacity or (iv) person in supervisory capacity drawing wages exceeding Rs 1,600 per month or functions are is mainly of managerial nature. [section 2(x)].

Adjudication of disputes – The Act provides for ‘Works Committee' in factories employing 100 or more workers. [section 3]. The committee will consist of equal number of representatives of employer and employees. Representatives of employees will be selected in consultation with Registered Trade Union. The Works Committee will first try to settle disputes. If dispute is not solved, it will be referred to ‘Conciliation Officer'. He is appointed by Government. [section 4]. The matter may also be referred to ‘Board of Conciliation'. [section 4]. He will try to arrive at fair and amicable settlement acceptable to both parties. If he is unable to do so, he will send report to appropriate Government. [section 12(4)]. The Government may then refer the industrial dispute to Board of conciliation, Labour Court or Industrial Tribunal. [section 12(5)].

Employer and employees can voluntarily refer the matter to arbitration. [section 10A]. [This provision is very rarely used by employer and workmen. Generally, they prefer the Court route].

If no settlement is arrived at, there is three tier system of adjudication – Labour Court, Industrial Tribunal and National Tribunal. The order made by them is ‘award'.

‘Award' means an interim or final determination of any industrial dispute or of any question relating thereto by any Labour Court, Industrial Tribunal or National Tribunal. It also includes arbitration award. [section 2(b)]. - - The ‘award' is required to be published by State/Central Government within 30 days. [section 17]. The award becomes effective 30 days after its publication. [section 17A].

Labour Court – Labour Courts are constituted by State Governments u/s 7. It will be presided over by ‘Presiding Officer'. The Labour Court has powers in respect of * Interpretation of Standing Orders * Violation of Standing Orders * Discharge or dismissal of a workman * Withdrawal of any customary concession or privilege * Illegality or otherwise of a strike or lock-out * Other matters which are not under Industrial Tribunal. [Second Schedule to the Act]

Industrial tribunal – Industrial Tribunal is constituted by State Government u/s 7A. The tribunal will be presided over by ‘Presiding Officer. The Industrial Tribunal has powers in respect of * Wages, including period and mode of payment * Compensatory and other allowances * Hours of work and rest intervals * Leave with wages and holidays * Bonus, profit sharing, provident fund and gratuity * Shift working changes * Classification by grades * Rules of discipline * Ratinlanisation and retrenchment of workmen. [Third Schedule to Act].

National Tribunal – National Tribunal is formed by Central Government for adjudication of industrial disputes of national importance or where industrial establishments situated in more than one States are involved. [section 7B].

Reference of dispute – Appropriate Government can refer any dispute to Board of Conciliation, Court of Enquiry, Labour Court or Industrial Tribunal. [section 10(1)]. - - Appropriate Government means * Central Government in case of railways, docks, IFCI, ESIC, LIC, ONGC, UTI, Airport Authority, industry carried on by or under authority of Central Government * State Government in case of other industrial disputes [section 2(a)].

Court/Tribunal can reduce punishment and order reinstatement - As per section 11A, the Labour Court and Tribunal have wide powers. They can reappraise evidence. They can also see whether the punishment is disproportionate to the gravity of the misconduct proved. If the Court or Tribunal is of the view that the punishment is disproportionate, it can impose lesser punishment or even set aside the termination and order reinstatement. - - If Court orders reinstatement and employer files appeal in Higher Court, the employer is required to pay full wages to the employee during the period of pendency of proceedings with High Court or Supreme Court. However, if the workman was gainfully employed elsewhere, Court can order that payment of such wages is not to be made. [section 17B].

Settlement - ‘Settlement' means a settlement arrived at in the course of conciliation proceedings. It includes a written agreement between employer and workmen arrived at otherwise than in course of conciliation proceedings (i.e. outside the conciliation proceedings). - - The difference is that settlement arrived at in course of conciliation or an arbitration award or award of labour court or Tribunal binds all parties to industrial dispute including present and future workmen and all parties who were summoned to appear in the proceedings. [section 18(3)]. If settlement is arrived at by mutual agreement, it binds only those who were actually party to agreement. [section 18(1)]. - - The settlement is binding during the period it is in force. Even after that period is over, it continues to be binding, unless a 2 month notice of termination is given by one party to another. [section 19(2]. - - If no period has been specified, settlement is valid for 6 months and an award is valid for one year.

Jurisdiction of civil court qua industrial dispute – Termination of a workman constitutes an Industrial Dispute. Relief sought can be given by forum under Industrial Disputes Act and hence, jurisdiction of civil court is impliedly barred. – Chandrakant Tukaram Nikam v. Municipal Corporation 2002 AIR SCW 710 = 2002(2) SCALE 77 = 2002 LLR 498 = 100 FJR 519 (SC 3 member bench).

Lay off, retrenchment and closure – 'Lay off' means failure, refusal or inability of employer on account of shortage of coal, power or raw materials or accumulation of stock or break down of machinery or natural calamity; to give employment to a workman on muster roll. - - ‘Lay off' means not giving employment within two hours after reporting to work. - - Lay off can be for half day also. In such case, worker can be asked to come in second half of the shift. [section 2(kkk)].

A factory employing 50 or more but less than 100 employees on an average per working day can lay off the workmen, who have completed one year of service, by paying compensation equal to 50% of salary (basic plus DA) (section 25C of IDA). - - Employer can offer him alternate employment, if the alternate employment does not call for any special skill or previous experience, and lay off compensation will not be payable if employee refuses to accept the alternate employment (section 25E).

Above provisions of compensation for lay off do not apply to (a) Industrial establishments employing less than 50 workmen (b) seasonal industry (c) Establishments employing 100 or more workmen, as in their case, prior approval of Appropriate Government is necessary u/s 25M(1).

Retrenchment – ‘Retrenchment' means termination by the employer of service of a workman for any reason, other than as a punishment inflicted by a disciplinary action. However, ‘retrenchment' does not include voluntary retirement or retirement on reaching age of superannuation or termination on account of non-renewal of contract or termination on account of continued ill-health of a workman. [section 2(oo)].

‘Retrenchment' means discharge of surplus labour or staff by employer. It is not by way of punishment. The retrenchment should be on basis of ‘last in first out' basis in respect of each category, i.e. junior-most employee in the category (where there is excess) should be retrenched first. [section 25G]. If employer wants to re-employer persons, first preference should be given to retrenched workmen. [section 25H].

A worker who has completed one year of service can be retrenched by giving one month notice (or paying one month's salary) plus retrenchment compensation, at the time of retirement, @ 15 days' average wages for every completed year of service (section 25F).

In Parry's Employees Union v. Third Industrial Tribunal 2001 LLR 462 (Cal HC), it was held that for purposes of retrenchment compensation under ID Act, the monthly salary should be divided by 30. [Under Gratuity Act, it has to be divided by 26].

If number of workmen are 100 or more, prior permission of Appropriate Government is necessary u/s 25N(1)].

Meaning of ‘continuous service' – Provisions of compensation for lay off and retrenchment are applicable only to workman who is in ‘continuous service' for one year. As per section 25B, ‘continuous service' includes service interrupted by sickness, authorised leave, accident or strike which is not illegal, or lock-out or cessation of work which is not due to fault of workman. -- In Workmen v. Management of American Express AIR 1986 SC 548 = 1985(4) SCC 71, it was held that ‘actually worked' cannot mean only those days where workman worked with hammer, sickle or pen, but must necessarily comprehend all those days during which he was in the employment of employer and for which has been paid wages either under express of implied contract of service or by compulsion of statute, standing orders etc.

Closure – ‘Closure' means permanent closing down of a place of employment or part thereof. [section 2(cc)]. - - Thus, closure can be of part of establishment also. - - 60 days notice should be given for closure to Government, if number of persons employed are 50 or more. 60 days notice is not necessary if number of persons employed are less than 50. [section 25FFA]. Compensation has to be given as if the workman is retrenched. [section 25FFF(1)]. - - If number of workmen employed are 100 or more, prior permission of Government is necessary for closure u/s 25-O.

Provisions for large industries for lay off and closure - Large industries employing 100 or more workmen on an average for preceding 12 months cannot lay-off, retrench or close down the undertaking without permission from Government (sections 25M to 25-O of Industrial Disputes Act). Invariably, such permission is almost never given, whatever may be the merits of the case.

Provisions of section 25M in respect of prior permission for lay off have been upheld in Papnasan Labour Union v. Madura Coats AIR 1995 SC 2200. Provisions of section 25N were upheld in Workmen v. Meenakshi Mills Ltd. - (1992) 62 Taxman 560 = 1992(1) SCALE 1248 = 1992 AIR SCW 1378 = (1992) 3 SCC 336 = JT 1992(3) SC 446 = 1992 LLR 481 = AIR 1994 SC 2696 (5 member bench). In this case, it was held that powers to give prior permission are quasi-judicial and hence opportunity of hearing must be given and the order giving permission or refusing permission is subject to judicial review. In Bharatia Electric Steel Co. Ltd. v. State of Haryana 1998 LLR 322 (P&H HC DB), it was observed that operation of section 25-O should be limited to cases where employer is acting arbitrarily or unfairly. If the reasons given by employer for closure are genuine and adequate, permission cannot be refused.

In Orissa Textiles v. State of Orissa 2002 AIR SCW 333 = 2002 LLR 225 = 100 FJR 342 (SC 5 member Constitution Bench), it was held that order u/s 35-O should be in writing with reasons. The order can be reviewed after one year, even for the same reasons.

If Banks refuse to give further loans to run the plant, the employer has to either abandon the plant or devise some dubious ways to surmount the difficulties. One of the major reason why foreign investors are reluctant to come to India in a big way is lack of ‘exit policy'. Some industrial sickness and closures are inevitable in a ‘market oriented economy'. Absence of official exit policy creates problems for honest employers (Dishonest employers devise their own ways).

Notice of change in conditions of service – Section 9A provides that an employer cannot effect any change in the conditions of service applicable to any workman without giving 21 days notice. Such notice is not required if there is settlement or award of Labour Court or Tribunal. As per fourth schedule to the Act, such 21 day notice is required if there is going to be change in wages, wage period, PF contribution, allowances, hours of work and rest intervals, shift timings, new rules of discipline, increase or decrease in number of persons employed in any department or shift.

Strike and lock-out – ‘Strike' means a cessation of work by a body of persons employed in any industry, acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment. [section 2(q)].

As per section 23, workman should not go on strike in * during pendency of conciliation proceedings and 7 days thereafter * during pendency of proceedings before Labour Court, Industrial Tribunal or National Tribunal * During period of arbitration proceedings * During period when settlement or award is in operation in respect of the matters covered by award or settlement.

Prohibition of strike and lock out in public utility service - .In case of public utility, employees have to give at least 14 days notice for strike. The notice is valid only if strike commences within 6 weeks. Otherwise, fresh notice is required. - - Similarly, an employer cannot declare lock out without giving 14 days notice. [section 22]. If such notice is received, Government authority should be informed within five days. - - As per section 2(n), ‘Public Utility Service' includes railways, major port and docks, section of industry on the working of which safety of establishment depends, postal/telegraph/ telephone services, industry supplying power/ light/ water; system of public conservancy or sanitation. [section 2(n)]. In addition, Government can declare industry specified in Schedule I as ‘Public Utility Services'. Such declaration can be made for 6 months at a time [section 2(n)(vi)]. [Industries in first schedule include banking, transport, cement, coal, defence establishments, security press, hospitals and dispensaries, oil fields, mining of certain specified ores, foodstuff, cotton textiles, iron and steel etc].

Lock-out – ‘Lock-out' means temporary closing or a place of employment or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him. [section 2(l)]. - - Workers go on strike, while ‘lock-out' is to be declared by employer.

Wages during strike period - Wages during strike period are payable only if the strike is both legal and justified - Syndicate Bank v. K Umesh Naik (1994) 5 SCC 572 = 1994 AIR SCW 4496 = 1994 II LLJ 836 = 1994 II LLN 1296 = (1994) 3 SCALE 565 = AIR 1995 SC 319 = 1994 II CLR 753 = 1994 LLR 883 (SC constitution bench) - followed in HMT Ltd. v. HMT Head Office Employees Assn 1997 AIR SCW 153 = AIR 1997 SC 585 = 1997 LLR 758. In HAL Employees Union v. Presiding Officer 1996 LLR 673 (SC), it was held that when lockout by employer is legal and justified, workmen are not entitled to payment of wages for the period during which the lock-out continued.

No work no pay - Principle of ‘No work no pay' has been accepted by Supreme Court. - Bank of India v. T S Kelawala 1989 LLR 277 (1990 LLR 313 ?) = 1990(SUP) SCALE 140(2) = (1990) 4 SCC 744 (SC) * Syndicate Bank v. K Umesh Naik (1994) 5 SCC 572 = 1994 AIR SCW 4496 = 1994 II LLJ 836 = 1994 II LLN 1296 = AIR 1995 SC 319 = 1994(3) SCALE 565 = 1994 II CLR 753 = 1994 LLR 883 (SC constitution bench). The principle of ‘no work no pay' is also applicable when a man was eligible for promotion but was not promoted and in fact did not work in the higher post. In such case, he is not eligible to get pay for higher scale - Paluru Ramkrishnaiah v. UOI - (1989) 2 SCR 92 - followed in State of Haryana v. OP Gupta - 1996(1) SCALE 602.

Illegal strike or lock-out – Strike or lock out in violation of sections 22 or 23 and when it is continuing in violation of order issued by Government u/s 10(3) (when matter is referred to Conciliation Board or Tribunal) is illegal. [section 24]. Fine upto Rs 50 per day to workman and Rs 1,000 to employer can be imposed. In addition, he can be imprisoned upto one month. [section 26].

Restrictions on employer pending proceedings – If any conciliation proceedings or proceedings are pending before arbitrator, labour court or Industrial Tribunal, following restrictions are applicable to employer.

No change in conditions of service in matters related to dispute – Employer shall not make any change in condition of service connected to dispute without permission of authority before whom proceedings are pending. [section 33(1)(a)]. Change which is not related to dispute can be made in accordance with standing orders without any permission. [section 33(2)(a)]

No removal of workman in matters related to dispute – Employer shall not discharge, dismiss or punish any workman in matter for any misconduct concerned to dispute, without permission of authority before whom proceedings are pending. [section 33(1)(b)]. Punishment which is not connected to dispute can be made in accordance with standing orders without any permission. However, dismissal or discharge of workman will require approval of the action. Application for approval should be made after action is taken. [section 33(2)(b)]. Prior permission is not necessary. Application for approval is required to be submitted after action is already taken. - -In Jaipur Zila Sahakari Bhoomi Vikas Bank v. Shri Ram Gopal 2002 AIR SCW 249 = 2002 LLR 237 (SC 5 member constitution bench), it was held that if the approval is not granted u/s 33(2)(b) of Industrial Disputes Act, the order of dismissal becomes ineffective from the date it was passed and employee becomes entitled to wages from date of dismissal to date of disapproval of application.

Protected workman - In every establishment, 1% of total workmen are recognised as ‘Protected workman' u/s 33(3) (but minimum 5 and maximum 100). In case of such workmen, order for his dismissal, discharge or punishment cannot be passed without permission of authority before whom proceedings are pending, whether the issue is related to dispute or not. Such permission is required only during the period proceedings are pending and not after main reference is decided.

Unfair Labour Practices – Section 25T prohibits unfair labour practices by employer or workman or a trade union. If any person commits unfair labour practice, he is punishable with fine upto Rs 1,000 and imprisonment upto 6 months. [section 25U]. Fifth schedule to Act gives list of what are ‘Unfair Labour Practices'. Then major are as follows –

In case of employer - * Interfering in Trade Union activities * Threatening workmen to refrain them from trade union activities * Establish employer sponsored Trade Union * Discourage trade union activities by various means * Discharge or dismiss by way of victimization or falsely implicating workman * Abolish work of regular nature and to give that work to contractors * Mala fide transfer of workman under guise of management policy * Employ badli or casuals and continue them for years * Recruitment workmen during strike which is not illegal * Acts of force and violence * Not implementing settlement or agreement or award * Refuse collective bargaining * Continue illegal lock-out

In case of workmen and trade unions - * Support or instigate illegal strike * Coerce workmen to join or not to join a particular trade union * Threatening or intimidating workmen who do not join strike * Refuse collective bargaining in good faith * Coercive actions including ‘go slow', ‘gherao', ‘squatting on work premises after working hours' etc. * Wilful damage to employer's property * Acts of force or violence or intimidation.

Regards

Arun K Mishra

Hi Shiva Kumar
Contribution period and Benefit period -
Contribution period is
(a) 1st September to 31st March
(b) 1st April to 30th September.
The corresponding benefit period is (a) following 1st July to 31st December
(b) following 1st January to 30th June.
Thus, ‘benefit period' starts three months after the ‘contribution period' is over.
The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period'.
Thus, an employee gets these benefits only after 9 months after joining employment and paying contribution. However, other benefits are available during contribution period also.
I think your querry is met.
Regards
Aruun K mishra

Hi Newlearner

The Employees State Insurance Act (ESI Act)

The ESI Act has been passed to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance' scheme i.e. employee gets benefits if he is sick or disabled.

ESIC - Employees State Insurance Corporation (ESIC) has been formed to supervise the scheme under section 3 of the Act. The Corporation supervises and controls the ESI scheme.

No dismissal or punishment during period of sickness - Section 73 of the Act provides that no employer shall dismiss, discharge or reduce or otherwise punish an employee during the period employee is in receipt of sickness benefit or maternity benefit. He also cannot dismiss, discharge or otherwise punish employee when he is in receipt of disablement benefit or is under medical treatment or is absent from work due to sickness.

This gives protection to employee when he is in receipt of sickness benefit or maternity benefit. Employer cannot take disciplinary action against employee in such cases. This provision is grossly misused by employees.

However, in Buckingham & Carnatic Co v. Venkatayya - AIR 1964 SC 1272 = 1963(7) FLR 343 = (1964) 4 SCR 265 = (1963) 2 LLJ 638 = 25 FJR 25 (SC), it was rightly held that this provision (of section 73) is applicable only in case of punitive action for all kinds of misconduct during which employee has received sickness benefits. This protection is not applicable in case of abandonment of employment or when termination is automatic as per contract. – followed in Rajveer Singh v. Judge 1996 LLR 61 (Raj HC), where it was hold that provisions of section 73 are not applicable when termination of an employee is automatic.

Applicability of ESI Scheme - The scheme is applicable to all factories. [section 1(4)]. The Appropriate Government can also make it applicable to any other industrial, commercial, agricultural or other establishments, by issuing notification and giving 6 month notice. [section 1(5)].

Thus, ESI Act can be made applicable to ‘shops' also. However, since Government has to provide for hospitals and medical facilities, the Act can be made applicable to different parts of State at different dates. Thus, if a factory is at a place where ESIC is unable to provide medical facilities, ESI Act may not be made applicable to that area. Government can exempt a factory or establishment or persons or class of persons from provisions of ESI Act, if the employees are getting better medical facilities/ [e.g. if Government is convinced that the factory itself is providing very good medical facilities e.g. like TISCO].

Regional Offices / Branch Offices get covered - Regional offices of a factory, which have their connection to the factory and where the Principal Employer has control over the regional offices, the regional offices will be covered under ESIC - Hyderabad Asbestos Cement Products v. ESIC - AIR 1978 SC 356 = (1978) 2 SCR 345 = (1978) 1 SCC 194. If head office is covered under ESIC, branch offices are also covered when branch and principal office are inter-dependent and there is unity of relationship. - Transport Corporation of India v. ESIC 1999(7) SCALE 63 = 2000 LLR 113 = 83 FLR 970 = 1999 AIR SCW 4340 = AIR 2000 SC 238 (SC 3 member bench).

Outside agencies can be covered - In PM Patel v. UOI (1986) 1 SCC 32 = AR 1987 SC 447 = 1985 II CLR 322 (SC), workers were given work of making 'bidis' as home. Right of rejection of bidis was with employer. It was held that test of control and supervision lies in the right of rejection. It was held that employees working outside can be covered under ESIC, if there is master servant relationship.

Definition of ‘factory' as per ESI Act - The ‘Factory' means any premises where manufacturing process is carried out. If manufacture is without aid of power, the Act is applicable if persons employed are at least 20. If manufacture is with aid of power, the Act applies if persons employed are at least 10. [section 2(12)]. - - However, ‘mines' have been excluded. - - ‘Manufacturing process' has same meaning as defined under Factories Act. [section 2(14AA)].

One a factory or establishment is covered, it continues to be covered even if number of employees reduce. [section 1(6)]

Construction workers not covered – Construction workers employed in construction activities are not covered under ESIC. – ESIC circular No. P-12(11)-11/27/99 Ins.IV dated 14-6-1999. - - However, if administrative office employs 20 or more eligible employees, that establishment and employees working in administrative office will be covered.

Employer under ESI Act – ‘Principal Employer' means * owner or occupier of factory * Head of department in case of Government department and * Person responsible for supervision and control, in case of any other establishment. [section 2(17)]. - - Employees working though contractor are also covered. ‘Contractor' is termed as ‘Immediate Employer'. ‘Immediate employer' means a person who has undertaken the execution, on the premises of factory or establishment to which this Act applies. He may do on his own or under the supervision of Principal Employer. The work should be part of work of factory or establishment of principal employer or is preliminary or incidental to the work of factory or establishment. [section 2(13)]. Primary liability of ESI contribution is of Principal Employer. [section 40(1)]. He can recover the contribution paid by him from the ‘immediate employer' i.e. contractor. [section 41].

Employee under ESI Act - ‘Employee' means any person employed for wages in or in connection with work of a factory or establishment to which the ESI Act applies. Employees drawing wages upto Rs. 7,500 per month can be presently covered under the ESI Act scheme. [section 2(9)].

Employees include * persons employed through contractor * Apprentices other than those covered under ‘Apprentices Act' * Persons employed in administration office, department or branch for purchase or sale of products. * Casual workers engaged in work incidental to or connected with work of factory or establishment * Employees working at head office when factory is located at different place * Canteen staff, watch and ward staff are employees * Staff in hospital attached to factory are employees. - - Members of Indian Naval, Military or Air Forces are excluded.

If an employee is drawing wages less than Rs. 7,500 per month at the beginning of his ‘contribution period', his contributions are payable for whole period of contribution period of six months even if in between his wages go above Rs. 7,500 p.m. [proviso to section 2(9)].

Following are not employees - * Persons drawing wages over Rs. 7,500 per month * member of Army, Navy or Air Force. * Partners of firm are not employees even if they are drawing wages - RD, ESIC v. Ramanuja Match Industry AIR 1985 SC 278 = 1985(1) SCC 218 = 1998(6) SCALE 38 * Persons employed in Government establishments. * construction workers engaged in raising additional building subsequent to initial set up of factory.

Contribution to ESIC Fund - Both employee and employer have to make contribution to ESIC. The employer has to deduct contribution from wages of employee and pay to ESIC both the employer's contribution as well as employees' contribution. [section 39(1)].

The contribution is payable for ‘wage period' i.e. the period in respect of which wages are payable to employee. [section 39(2)]. Normally, ‘wage period' is a month. The employee's contribution is 1.75% of wages. It should be rounded off to next 5 paise. Employees contribution is not payable when daily wages are below Rs 15/-.

Employer's contribution is 4.75% of total wage bill of all employees in respect of every wage period. Thus, it is not necessary to calculate employer's contribution separately for each employee. 4.75% of gross wages should be calculated and rounded off to next 5 paise. Employees drawing wages lower than Rs 25 per day do not have to pay employee's share. The contribution has to be paid within 21 days from close of the month. It is payable by a challan in authorised bank. - - If the contribution is not paid in time, interest @ 12% is payable. [section 39(5)(a)].

In addition, ESIC authorities can impose ‘damages' varying between 5% to 25% of arrears of contribution u/s 85B.

Employer cannot deduct employer's contribution from the salary of employee. [section 40(3)].

Liability of principal employer – In case of employees of contractor, liability is of Principal Employer. In Britannia Industries v. ESIC (2001) 98 FJR 520 (Mad HC), it was held that Principal Employer will be liable to penalty and damages also if contribution is not paid on due date. – same view in Padmini Products v. ESIC 2000(2) Kar LJ 369 (Karn HC).

Wage for purpose of ESI Act - ‘Wages' means all remuneration paid or payable in cash to employee according to terms of contract of employment and includes any payment made to an employee in respect of period of authorised leave, lock-out, lay-off, strike which is not illegal and other additional remuneration paid at interval not exceeding two months. It does not include * contribution paid by employer to any pension fund or provident fund * Travelling allowance * Reimbursement of expenses made by nature of employment of the employee * gratuity. [section 2(22)].

Thus, wages include basic pay, dearness allowance, city compensatory allowance, payment of day of rest, overtime wages, house rent allowance, incentive allowance, attendance bonus, meal allowance and incentive bonus. However, wages do not include annual bonus, unilateral rewards scheme (inam), ex gratia payments made every quarter or every year travelling allowance, retrenchment compensation, encashment of leave and gratuity.

Contribution period and Benefit period - Contribution period is (a) 1st September to 31st March (b) 1st April to 30th September. The corresponding benefit period is (a) following 1st July to 31st December (b) following 1st January to 30th June. Thus, ‘benefit period' starts three months after the ‘contribution period' is over. The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period'. Thus, an employee gets these benefits only after 9 months after joining employment and paying contribution. However, other benefits are available during contribution period also.

Benefits to employees covered under ESI Act - An employee is entitled to get benefits which are medical benefits as well as cash benefits. He also can get disablement benefit.

Regards

Arun K Mishra

Dear Arun,

Please clarify one thing for me: if ESI has not been implemented in the organization, can any woman still avail maternity benefits?

Regards

Hi Nirmal Negi

Please let us more about your organisation.

although I am posting the Brief Summary of both the Act.

Employees Provident Funds Act, 1952

As per Preamble to the Act, the EPF Act is enacted to provide for the institution of provident funds, pension fund and deposit lined insurance fund for employees in factories and other establishments. - - The Employees' Provident Funds and Miscellaneous Provisions Act is a social security legislation to provide for provident fund, family pension and insurance to employees. Employee has to pay contribution towards the fund. Employer also pays equal contribution. The employee gets a lump sum amount when he retires, which will be useful to him after retirement. The Act covers three schemes i.e. PF (Provident Fund scheme), FPF (Family Pension Fund scheme) and EDLI (Employees Deposit Linked Insurance scheme).

The EPF Act contains basic provisions in respect of applicability, eligibility, damages, appeals, recovery etc. The three schemes formed by Central Government under the Act make provisions in respect of those schemes.

Applicability of the Act - The Act applies to (a) Every establishment which is a factory engaged in industry specified in Schedule I to the Act and in which 20 or more persons are employed and (b) any other establishment or class of establishment employing 20 or more persons which may be specified by Central government by notification in official gazette. - - Central Government can also apply provisions of the Act to any establishment even if it employs less than 20 persons. [section 1(3)].

In RPFC v. T S Hariharan 1971 Lab IC 951 (SC), it was held that temporary workers should not be counted to decide whether the Act would apply.

Even if the provisions of PF Act are not applicable in a particular establishment, if employer and majority of employees agree, the Central Provident Fund Commissioner can apply the provisions to that establishment by issuing a notification in Official Gazette. [section 1(4)]. Once the provisions of Act become applicable, it continues to be applicable even if number of employees fall below 20. [section 1(5)].

Coverage of Act - The Act has been extended to * Factories * Mines other than coal mines * Hotels and restaurants * Plantation of tea, coffee, rubber [Tea factories in Assam have been excluded vide para 1(3)(a) of EPF Scheme] * Trading and commercial establishments engaged in purchase, sale or storage of goods * Establishments of exporters, importers, advertisers, stock exchanges * Canteens * Establishments of Attorneys, CA, ICWAs, Engineers and Contractors, architects and medical practitioners * Hospitals * Travel agencies * Banks doing business only in one State * General Insurance * Expert services * Clubs and societies rendering services to their members * Agricultural farms * Financial Establishments other than banks * Building and construction Industry * Poultry farming * University, college or schools. - - The Act has been extended w.e.f. 1.4.2001 vide notification dated 22.3.2001, to * courier services * Aircraft or airlines other than aircraft or airline owned or controlled by Government * Establishment engaged in rendering cleaning and sweeping services.

Once an establishment is covered under PF, all its departments and branches wherever they are situated are also covered.

Other non-factory establishments covered - Besides factories, other establishments employing 20 or more persons can be covered under the Act u/s 1(3)(b). Various notifications have been issued extending the provisions of PF Act to non-factory establishments. Some major among them are - plantation, mines, coffee, hotels and restaurants, cinema and theatres, trading and commercial establishments, laundry, canteens, establishments of attorneys/CA/ ICWA/engineers/ architects/medical practitioners, hospitals, financial establishments (other than IFCI, UTI, IDBI, SFC), building and construction industry, poultry, university, college, schools, scientific institutions etc.

Transitory provisions when Act is extended - It is possible that when PF Act is extended to certain establishment, some PF scheme may be already in existence. Such scheme will continue and the balance amount in such scheme to credit of the employee will be transferred to the Provident Fund under statutory scheme of PF Act. [section 15].

Establishment to include all departments and branches - Where an establishment consists of different departments or has branch­es, whether situate in the same place or in different places, all such departments or branches shall be treated as parts of the same establishment. [section 2A]. - - Thus, if factory is covered, the head office and branches will also be covered under the Act.

Act not applicable to certain establishments - As per section 16(1), the PF Act does not apply to (a) any establishment registered under Cooperative Societies Act or State law relating to cooperative societies, employing less than 50 persons and working without paid of power (b) to any establishment belonging to or under Control of Central Government or a State Government and whose employees are entitled to benefit of contributory provident fund or old age pension. (c) to any establishment set up under any Central or State Act and whose employees are entitled to benefit of contributory provident fund or old age pension..

Where PF Act is not applicable - The PF Act is not applicable to certain establishments—* Factories or establishments employing less than 20 employees. However, once Act becomes applicable, it continues to apply even if subsequently, the number is lower than 20 * Banks doing business in more than one State * Coal mines * Units established under Cooperative Societies Act employing less than 50 workers and working without aid of power * Other establishments belonging to or under control of Central Government or State Governments and whose employees are entitled to benefits of contributory provident fund or pension. * Tea factories in Assam * Exemption granted by Central Government by a special notification.

Administration of the Fund - Both employer and employee have to pay contribution at prescribed rates.. These amounts are credited to a fund. The fund vests in and is administered by Central Board. [section 5(1A)].

Employees covered under the scheme - As per section 2(f), “employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment, and who gets his wages directly or indirectly from the employer. It includes any person - (i) employed by or through a contractor in or in connection with the work of the establishment (ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under the standing orders of the establishment.

Thus, (a) Persons employed through contractor in connection with work of establishment are covered (b) Apprentices employed under Apprentices Act or under standing orders of establishment are excluded, i.e. they are not employees. [The model standing orders merely state that an ‘apprentice' is a learner who is paid an allowance during the period of his training].

Non-Eligible employees under PF - * Employee whose ‘pay' is more than Rs. 6,500 per month are not eligible. (It may be noted that limit of pay was Rs 5,000 upto 31.5.2001 and Rs. 3,500 upto 30th Sept., 94) * Apprentices as per certified standing orders or under Apprentices Act * Casual employees. However, employees employed through contractors have also to be covered under PF.

Employee to become member of Fund immediately on joining – Every employee employed in or in connection with work of a factory or establishment to which the Act applies is entitled and required to become member of Provident Fund, unless he is an excluded employee. [para 26(1) of EPF Scheme]. An employee who is drawing ‘pay' above prescribed limit (presently Rs 6,500) can become member with permission of Assistant PF Commissioner, if he and his employer agree. [para 26(6) of EPF Scheme].

Contribution by employer and employee - As per section 2(c) “contribution” means a contribution payable in respect of a member under a Scheme or the contribution payable in respect of an employee to whom the Insurance Scheme applies.

As per section 6, contribution shall be paid by employer @ 10% of basic wages plus dearness allowance plus retaining allowance. This amount is defined as ‘pay' as per explanation to para 2(f)(ii) of EPF Scheme.

Equal contribution is payable by employee also. This contribution can be increased to 12% by Central Government and in fact, has been increased to 12% in most of the cases.

A person who is already a member continues to be a ‘member' even if his ‘pay' exceeds Rs 6,500. However, the contribution is limited to Rs 6,500 only. [para 26A(2) of EPF Scheme].

RPFC is liable under Consumer Protection Act - The Regional Provident Fund Commissioner is providing service under the Act and hence he is liable under Consumer Protection Act. - RPFC v. Shiv Kumar Joshi (1996) 4 CTJ 805 = 1996 LLR 641 (NCDRC 5 member bench) - confirmed in RPFC v. Shiv Kumar Joshi 1999 AIR SCW 4456 = 1999(7) SCALE 453 = 2000 LLR 217 = AIR 2000 SC 331 = 99 Comp Cas 347 = (2000) CLA-BL Supp 26 = 24 SCL 46 (SC).

Employees Provident Fund Scheme - This is the main scheme under the Act. Both employer and employee have to pay contribution to Provident Fund. The employer has to deduct contribution of employee from the salary of employee and has to pay both employees' contribution as well as employer's contribution by a challan in prescribed form. The amount has to be paid in approved bank.

Employee can pay higher contribution - Employee has to contribute 12/10% of his 'pay' as contribution. The employee can voluntarily pay higher contribution above the statutory rate. However, employer does not have to match the voluntary contribution, over and above the statutory rate. [para 26(2) of EPF Scheme].

Contribution payable under PF Scheme - The Principal Employer is liable to pay contribution of his own employees as well as employees employed through contractor. Principal Employer can recover from contractor the amount paid by him on behalf of contractor. The contribution is 12% of ‘pay' i.e. basic wages, plus dearness allowance, cash value of food concession and retaining allowance. Contribution of both employer and employee is same i.e. 12% each. [para 29 of EPF Scheme].

Employer has to pay his contribution to EPF. He cannot deduct his contribution from wages of the employee. [Para 31 of EPF Scheme]. However, he has to deduct employee's share from his salary and pay the same in EPF scheme. This deduction can be only from the wages pertaining to period for which contribution is paid. However, if there is accidental omission, the amount can be recovered later. Amount deducted from salary of employees is held in trust by the employer or contractor. [Para 32 of EPF Scheme].

Out of employer's contribution of 12/10%, the Employer's contribution of 8.33% will be diverted to Employees' Pension Scheme. The balance will be retained in the EPF scheme. Thus, on retirement, the employee will get his full share plus the balance of Employer's share retained to his credit in EPF account. [This diversion is only w.e.f. 16th November, 95. Earlier Employer's contribution to their credit will continue to remain to their credit].

Lower contribution in certain cases - The employer's and employee's contribution is 12% each. This is applicable to many of industries and establishments. However, this contribution is not applicable to - * any establishment employing less than 20 persons * any establishment registered with Board for Industrial and Financial Reconstruction (BIFR) as a sick company - the lower rate of contribution continues till its net worth is positive * any other establishment which has accumulated loss equal to or more than its assets and has also suffered cash loss in last two years. * Jute industry * Beedi industry * Brick industry * Coir industry other than the spinning sector * Guar gum factories. In these cases, the contribution is 10%.

Interest on account – PF Commissioner shall maintain account of each member of EPF scheme. [Para 59 of Scheme]. Interest is credited to the account of employee. The Interest is calculated on monthly running balance basis. Amount standing to credit at end of the month is considered for calculation of interest for the following month. The interest rate is declared every year by Central Government in consultation with Central Board of Trustees of Provident Fund. [Para 60 of EPF Scheme].

Employees' Pension Scheme - This scheme has been introduced w.e.f. 16th November, 95. The Scheme is applicable to all subscribers of Employers' Provident Fund. It is also compulsory to persons who were subscribers as on 16.11.95.

Contribution - The employer's contribution of 8.33% will be diverted to the fund of Pension Scheme. Employee does not have to make any contribution. Employer's contribution is 12%/ 10%. In such cases, 8.33% is diverted to Pension scheme and balance 1.67%/3.67% as the case may be, will be in credit of employee's name in Provident Fund account. The 8.33% is on maximum salary of Rs. 6,500. If some employers are paying contribution on salary in excess of Rs. 6,500, the excess contribution will be credited to Provident Fund account and not to Pension scheme.

No separate administration charges or inspection charges are payable, as these are already paid along with Provident Fund contribution.

Benefits under the scheme - Members will get pension on superannuation or retirement from service and upon disablement during employment. Family pension will be available to widow/widower for life or till he/she remarries. In addition, children will be entitled to pension, upto 25 years of their age. In case of orphans, pension at enhanced rate is available upon death of widow/widower or ceasing payment of widow pension. Benefit of pension to children or orphan is only restricted for two children/orphans.

If the person is unmarried or has no family, pension is available to nominee for a specified period.

Commutation of Pension - The member can commute 33.33% of the pension, so as to receive hundred times the monthly pension so commuted as commuted value of pension. Balance will be paid on monthly basis.

Employees Deposit Linked Insurance Scheme - The purpose of the scheme is to provide life insurance benefits to employees who are already covered under PF/FPF. The employer has pay contribution equal to 0.50% of the total wages of employees In addition, administrative charges of 0.1% of total wages. [Notification No. AO 503(E) dated 28-7-1976 issued u/s 6C(2) of PF Act].

The employee does not contribute any amount to the scheme. The salary limit for coverage of employees is same as that of Provident Fund.

Exemption from the scheme can be obtained from RPFC if LIC Group Gratuity scheme is adopted by employer. If exemption is granted, only inspection charges @ 0.005% are payable to PF authorities.

Benefit to nominee of employee - If an employee dies during employment, his nominee or family member gets an amount equal to average balance in the Provident Fund Account of the deceased employee during last 12 months. If such balance is more than Rs. 35,000, the insurance amount payable is Rs. 35,000 plus 25% of the amount in excess of Rs. 35,000, subject to overall limit of Rs. 60,000. If the employees are covered under another life insurance scheme whose benefits are better than this scheme, an exemption from this scheme can be obtained. [Increased to 35,000 and 60,000 w.e.f. 13.6.2000]

The Employees State Insurance Act (ESI Act)

The ESI Act has been passed to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance' scheme i.e. employee gets benefits if he is sick or disabled.

ESIC - Employees State Insurance Corporation (ESIC) has been formed to supervise the scheme under section 3 of the Act. The Corporation supervises and controls the ESI scheme.

No dismissal or punishment during period of sickness - Section 73 of the Act provides that no employer shall dismiss, discharge or reduce or otherwise punish an employee during the period employee is in receipt of sickness benefit or maternity benefit. He also cannot dismiss, discharge or otherwise punish employee when he is in receipt of disablement benefit or is under medical treatment or is absent from work due to sickness.

This gives protection to employee when he is in receipt of sickness benefit or maternity benefit. Employer cannot take disciplinary action against employee in such cases. This provision is grossly misused by employees.

However, in Buckingham & Carnatic Co v. Venkatayya - AIR 1964 SC 1272 = 1963(7) FLR 343 = (1964) 4 SCR 265 = (1963) 2 LLJ 638 = 25 FJR 25 (SC), it was rightly held that this provision (of section 73) is applicable only in case of punitive action for all kinds of misconduct during which employee has received sickness benefits. This protection is not applicable in case of abandonment of employment or when termination is automatic as per contract. – followed in Rajveer Singh v. Judge 1996 LLR 61 (Raj HC), where it was hold that provisions of section 73 are not applicable when termination of an employee is automatic.

Applicability of ESI Scheme - The scheme is applicable to all factories. [section 1(4)]. The Appropriate Government can also make it applicable to any other industrial, commercial, agricultural or other establishments, by issuing notification and giving 6 month notice. [section 1(5)].

Thus, ESI Act can be made applicable to ‘shops' also. However, since Government has to provide for hospitals and medical facilities, the Act can be made applicable to different parts of State at different dates. Thus, if a factory is at a place where ESIC is unable to provide medical facilities, ESI Act may not be made applicable to that area. Government can exempt a factory or establishment or persons or class of persons from provisions of ESI Act, if the employees are getting better medical facilities/ [e.g. if Government is convinced that the factory itself is providing very good medical facilities e.g. like TISCO].

Regional Offices / Branch Offices get covered - Regional offices of a factory, which have their connection to the factory and where the Principal Employer has control over the regional offices, the regional offices will be covered under ESIC - Hyderabad Asbestos Cement Products v. ESIC - AIR 1978 SC 356 = (1978) 2 SCR 345 = (1978) 1 SCC 194. If head office is covered under ESIC, branch offices are also covered when branch and principal office are inter-dependent and there is unity of relationship. - Transport Corporation of India v. ESIC 1999(7) SCALE 63 = 2000 LLR 113 = 83 FLR 970 = 1999 AIR SCW 4340 = AIR 2000 SC 238 (SC 3 member bench).

Outside agencies can be covered - In PM Patel v. UOI (1986) 1 SCC 32 = AR 1987 SC 447 = 1985 II CLR 322 (SC), workers were given work of making 'bidis' as home. Right of rejection of bidis was with employer. It was held that test of control and supervision lies in the right of rejection. It was held that employees working outside can be covered under ESIC, if there is master servant relationship.

Definition of ‘factory' as per ESI Act - The ‘Factory' means any premises where manufacturing process is carried out. If manufacture is without aid of power, the Act is applicable if persons employed are at least 20. If manufacture is with aid of power, the Act applies if persons employed are at least 10. [section 2(12)]. - - However, ‘mines' have been excluded. - - ‘Manufacturing process' has same meaning as defined under Factories Act. [section 2(14AA)].

One a factory or establishment is covered, it continues to be covered even if number of employees reduce. [section 1(6)]

Construction workers not covered – Construction workers employed in construction activities are not covered under ESIC. – ESIC circular No. P-12(11)-11/27/99 Ins.IV dated 14-6-1999. - - However, if administrative office employs 20 or more eligible employees, that establishment and employees working in administrative office will be covered.

Employer under ESI Act – ‘Principal Employer' means * owner or occupier of factory * Head of department in case of Government department and * Person responsible for supervision and control, in case of any other establishment. [section 2(17)]. - - Employees working though contractor are also covered. ‘Contractor' is termed as ‘Immediate Employer'. ‘Immediate employer' means a person who has undertaken the execution, on the premises of factory or establishment to which this Act applies. He may do on his own or under the supervision of Principal Employer. The work should be part of work of factory or establishment of principal employer or is preliminary or incidental to the work of factory or establishment. [section 2(13)]. Primary liability of ESI contribution is of Principal Employer. [section 40(1)]. He can recover the contribution paid by him from the ‘immediate employer' i.e. contractor. [section 41].

Employee under ESI Act - ‘Employee' means any person employed for wages in or in connection with work of a factory or establishment to which the ESI Act applies. Employees drawing wages upto Rs. 7,500 per month can be presently covered under the ESI Act scheme. [section 2(9)].

Employees include * persons employed through contractor * Apprentices other than those covered under ‘Apprentices Act' * Persons employed in administration office, department or branch for purchase or sale of products. * Casual workers engaged in work incidental to or connected with work of factory or establishment * Employees working at head office when factory is located at different place * Canteen staff, watch and ward staff are employees * Staff in hospital attached to factory are employees. - - Members of Indian Naval, Military or Air Forces are excluded.

If an employee is drawing wages less than Rs. 7,500 per month at the beginning of his ‘contribution period', his contributions are payable for whole period of contribution period of six months even if in between his wages go above Rs. 7,500 p.m. [proviso to section 2(9)].

Following are not employees - * Persons drawing wages over Rs. 7,500 per month * member of Army, Navy or Air Force. * Partners of firm are not employees even if they are drawing wages - RD, ESIC v. Ramanuja Match Industry AIR 1985 SC 278 = 1985(1) SCC 218 = 1998(6) SCALE 38 * Persons employed in Government establishments. * construction workers engaged in raising additional building subsequent to initial set up of factory.

Contribution to ESIC Fund - Both employee and employer have to make contribution to ESIC. The employer has to deduct contribution from wages of employee and pay to ESIC both the employer's contribution as well as employees' contribution. [section 39(1)].

The contribution is payable for ‘wage period' i.e. the period in respect of which wages are payable to employee. [section 39(2)]. Normally, ‘wage period' is a month. The employee's contribution is 1.75% of wages. It should be rounded off to next 5 paise. Employees contribution is not payable when daily wages are below Rs 15/-.

Employer's contribution is 4.75% of total wage bill of all employees in respect of every wage period. Thus, it is not necessary to calculate employer's contribution separately for each employee. 4.75% of gross wages should be calculated and rounded off to next 5 paise. Employees drawing wages lower than Rs 25 per day do not have to pay employee's share. The contribution has to be paid within 21 days from close of the month. It is payable by a challan in authorised bank. - - If the contribution is not paid in time, interest @ 12% is payable. [section 39(5)(a)].

In addition, ESIC authorities can impose ‘damages' varying between 5% to 25% of arrears of contribution u/s 85B.

Employer cannot deduct employer's contribution from the salary of employee. [section 40(3)].

Liability of principal employer – In case of employees of contractor, liability is of Principal Employer. In Britannia Industries v. ESIC (2001) 98 FJR 520 (Mad HC), it was held that Principal Employer will be liable to penalty and damages also if contribution is not paid on due date. – same view in Padmini Products v. ESIC 2000(2) Kar LJ 369 (Karn HC).

Wage for purpose of ESI Act - ‘Wages' means all remuneration paid or payable in cash to employee according to terms of contract of employment and includes any payment made to an employee in respect of period of authorised leave, lock-out, lay-off, strike which is not illegal and other additional remuneration paid at interval not exceeding two months. It does not include * contribution paid by employer to any pension fund or provident fund * Travelling allowance * Reimbursement of expenses made by nature of employment of the employee * gratuity. [section 2(22)].

Thus, wages include basic pay, dearness allowance, city compensatory allowance, payment of day of rest, overtime wages, house rent allowance, incentive allowance, attendance bonus, meal allowance and incentive bonus. However, wages do not include annual bonus, unilateral rewards scheme (inam), ex gratia payments made every quarter or every year travelling allowance, retrenchment compensation, encashment of leave and gratuity.

Contribution period and Benefit period - Contribution period is (a) 1st September to 31st March (b) 1st April to 30th September. The corresponding benefit period is (a) following 1st July to 31st December (b) following 1st January to 30th June. Thus, ‘benefit period' starts three months after the ‘contribution period' is over. The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period'. Thus, an employee gets these benefits only after 9 months after joining employment and paying contribution. However, other benefits are available during contribution period also.

Benefits to employees covered under ESI Act - An employee is entitled to get benefits which are medical benefits as well as cash benefits. He also can get disablement benefit.

regards

Arun K Mishra

Under ESI -Contribution period and Benefit period - Contribution period is (a) 1st September to 31st March (b) 1st April to 30th September. The corresponding benefit period is (a) following 1st July to 31st December (b) following 1st January to 30th June. Thus, ‘benefit period' starts three months after the ‘contribution period' is over. The relevance of this definition is that sickness benefit and maternity benefit is available only during ‘benefit period'. Thus, an employee gets these benefits only after 9 months after joining employment and paying contribution. However, other benefits are available during contribution period also.

Factories Act, 1948

Leave - A worker is entitled in every calendar year annual leave with wages at the rate of one day for every 20 days of work performed in the previous calendar year, provided that he had worked for 240 days or more in the previous calendar year. Child worker is entitled to one day per every 15 days. While calculating 240 days, earned leave, maternity leave upto 12 weeks and lay off days will be considered, but leave shall not be earned on those days. [section 79]. – Leave can be accumulated upto 30 days in case of adult and 40 days in case of child. Leave admissible is exclusive of holidays occurring during or at either end of the leave period. Wage for period must be paid before leave begins, if leave is for 4 or more days. [section 81]. Leave cannot be taken for more than three times in a year. Application for leave should not normally be refused. [These are minimum benefits. Employer can, of course, give additional or higher benefits].

Payment of Bonus Act, 1965

Minimum bonus - Every employer shall be bound to pay to every employee in respect of any accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. Where an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is 8.33% or Rs 60 whichever is higher. [section 10].

While computing number of working days, an employee shall be deemed to have worked in an establishment even on the days on which (a) He was laid off (b) He was on leave with salary/wages(c) He was absent due to temporary disablement caused by accident arising out of and in course of employment and (d) Employee was on maternity leave with salary/wages. [section 14].

Hi Arun,

One update: The notification coverage limit for employees has been raised from 7500 to 10000 PM.

Second: I am unclear on the concept of the Contribution period. According to your statement, the Contribution period is:
(a) 1st September to 31st March
(b) 1st April to 30th September.
Are we paying for September twice? Please help clarify.

Meraj

Hi Meraj

Thanks for pointing out the error.

Contribution



E.S.I. Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Corporation in respect of an employee shall comprise of employer's contribution and employee's contribution at a specified rate. The rates are revised from time to time. Currently, the employee's contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employer's is 4.75% of the wages paid/payable in respect of the employees in every wage period. Employees in receipt of a daily average wage upto Rs.50/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

Collection of Contribution

An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 21 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf.

Contribution Period and Benefit Period

There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

Contribution period Corresponding Cash Benefit period

1st April to 30th Sept 1st January of the following year to 30th June.

1st Oct. to 31st March 1st July to 31st December of the year following

thanks and regards

Arun K Mishra

Hi Shivakumar,

Maternity Benefits

Maternity Benefit is payable to an Insured Woman in the following cases subject to contributory conditions: Confinement-payable for a period of 12 weeks (84 days) on production of Form 21 and 23. Miscarriage or Medical Termination of Pregnancy (MTP)-payable for 6 weeks (42 days) from the date following miscarriage-on the basis of Form 20 and 23. Sickness arising out of Pregnancy, Confinement, Premature birth-payable for a period not exceeding one month-on the basis of Forms 8, 10 and 9. In the event of the death of the Insured Woman during confinement leaving behind a child, Maternity Benefit is payable to her nominee on production of Form 24 (B). Maternity benefit rate is double the Standard Benefit Rate or roughly equal to the average daily wage.

Regards,
Arun K Mishra

Hi Arun,

I am working in a public limited company. Can you please tell me how I can submit the annual return for the Maternity Benefit Act? I have been told that we need to fill out Forms L, M, N for the same, but these forms mention they are for Mines and Circuses only. Please advise.

Regards,
Disha

Hi,

I am working in a public limited company. Can you please tell me how I can submit the annual return for the Maternity Benefit Act? I have been told that we need to fill out Forms L, M, N for the same, but on these forms, it is mentioned that they are for Mines and Circus only. Please advise.

Regards,
Disha

Dear Sir,

I am not clear about the calculation of medical bonus under the Maternity Benefit Act, i.e., about entitlement (in case of miscarriage also, in case of maternity benefit - delivery), the number of days, rate, and maximum amount. Can you help me calculate the same?

Regards

Hi,

What happens if the lady, after availing full maternity benefits, resigns from the company within the next 6 to 12 months? Can the employer deduct some amount, say four weeks' worth, from her Full and Final Settlement?

Regards,
Ashutosh.