Compensation Confusion: Who Pays – The Organization or ESIC?

Hi, I have one question regarding compensation for one of our HR department employees. Is the organization going to pay the compensation, or is ESIC going to pay it?

Compensation Payment Responsibility

If the organization is paying, why do we need to contribute towards ESIC? What are the slabs for the organization to pay the compensation?

If an employee is covered under ESIC, then employee compensation is not compulsory as this is taken care of in ESI. However, if the employee is not covered by ESIC, it is the company's liability to pay the compensation in case of any unfortunate incident. This liability can be transferred to the insurance company by obtaining an Employee Compensation Policy.

An employee can only receive benefits under one act, either ESI or Workmen's Compensation. The ESI Act clearly specifies that if an employee is covered under ESI, then the benefits of WC cannot be given. In the case of WC, the slabs are part of the schedule referred to in the WC Act.

Regards,
Preetam Deshpande

Is it applicable for all employees irrespective of their gross salary? I mean, does it apply to Manager cadres as well?

ESI is applicable across the board irrespective of the grade. If the person falls within the provisions of ESI, then they have to be covered under ESI.

ESIC Coverage and Compensation

ESIC is applicable if the employee's salary is below $15,000 (gross amount). Where the gross salary is higher, the coverage ends after the half-year is over. There is no legal option to receive compensation from both. The union may push for higher compensation, which is another matter.

What Preetam is saying is correct. Employees who are covered under ESI are eligible to get benefits from ESI, which is not compulsory for said employees. However, if the management wants to provide more protection to their employees, they can extend the coverage to them. In case of taking any compensation, the employees can claim from only one authority, not both.

Regards,
Devendra

Irrespective of categories such as Manager, workmen trainee, or casuals, those who are drawing a Gross Salary of Rs. 15,000/- and below are covered under the ESI Act. In case of any loss of earning capacity due to an accident on the shop floor (Factory), they are taken care of under the ESI Act, and their treatment, medical bills, and cash benefits for the period of treatment are paid by the ESI.

If the organization is not covered under the ESI Act, the industry is covered under the Workmen's Compensation Act. In case of an accident, the Management has to pay all the above-cited benefits to the injured workmen. Usually, the Management takes a policy from an Insurance Company to meet such contingencies. For loss of earnings due to injuries, the Act provides suitable compensation depending on the nature of the injury.

Hope this clarifies your doubts.

Regards,
G.K. Manjunath Sr. Manager-HR

I agree with your comments. Is there a procedure for compensation from ESIC? If so, could you please provide the documents if employees are covered under ESIC?

If employees are not covered under ESIC, could I know how to get the compensation amount? Are there any rules and regulations?

I think you have many confusions in your mind. Let me know the answers to the questions:

1. Which state/district is your factory located in? Is that area covered by ESI? How many employees are working in your factory? Is the number of employees above 20? If yes, then as per your state's rules, you may be covered under ESI, or you have to take a WC policy for the workers whose salary is below 15,000.

For getting compensation, you have to take the first WC policy from any insurance company like United, Oriental, National, or any other insurance company dealing in General Insurance. Take the policy, and if you want to claim compensation, then involve the insurance agency for further procedures.

I think this clears your queries.

Regards,
Devendra Deshpande
Manager HR

I am not confused; anyway, I am trying to provide clarification on the above statements.

1. Hyderabad and Andhra Pradesh are covered under ESIC. There are 75 employees working, and all are earning less than 15,000 except for 10.

The ESI authorities cover industries under its Act. Every employee drawing less than Rs. 15,000 should be covered under the Act. When an accident takes place in the industry, the management has to forward the Accident Report in Form No. 12, giving the time, date, place of the accident, location of injury, quantum of injury, etc. On receipt of the report, the authorities visit the industry for inspection and submit the report to the higher-ups. Based on the report, they determine the compensation depending on the quantum of injury/nature of injury = loss of earning capacity. Such employees receive benefits (pension) until their death.

If your industry is not covered under the Act, as management, you have to bear all the costs of medical expenses, payment for the absent period, and the amount fixed by the compensation commissioner if the concerned party raises a dispute before the labor authorities. The Workmen Compensation Act defines and fixes the nature of injury and quantum of compensation.

I hope this has cleared your doubts.

Regards, G.K. Manjunath

If your factory is covered by ESI, then don't worry about the WC policy. As I mentioned before, the WC policy is additional coverage for the workers. According to the ESI Act, the ESI facility is mandatory for your factory. If management wishes to cover your workers, they can take out a WC policy.

Provision for Higher Earners

Has management made any provision for employees earning more than 15K?

Regards,
Devendra Deshpande

You can take GPA (Group Personal Accident Policy) and WC (Workers' Compensation) policy as well, but the benefits will be as per the respective Acts. In the event of the loss of any body part due to an accident, compensation will be provided. If the accident occurs in the factory, more details can be obtained. It is advised to seek the guidance of an insurance consultant who will help in properly covering employees earning a salary of more than 15k.

For more details, please consult an insurance advisor.

Regards,
Devendra Deshpande