Is ESIC Mandatory for Factories or Can Health Insurance Be a Substitute?

I need a small help. Is ESIC a mandatory requirement for a factory? In case a factory does not want to opt for ESIC and instead provides equivalent facilities through health insurance, would that comply with the regulations?

Thank you.

If employees in your factory are in receipt of benefits substantially similar or superior to benefits under ESIS, then only can you seek an exemption as per section 87. This is not possible, so please don't think of it. You cannot have similar or superior benefits to ESIS. To my knowledge, only TELCO has this exemption.

This exemption is granted for a maximum of 1 year and can be renewed for a maximum of 1 year at a time upon application.

Regards.

Dear Neha ji, regarding the facilities provided by ESIC, they are not up to the mark and do not serve the intended purpose. What could be the best possible alternative solution?

If employees in your factory receive benefits that are substantially similar or superior to those under ESIS, then only can you apply for an exemption under section 87. However, this is not feasible, so please do not consider it. It is unlikely that you have benefits similar or superior to ESIS. As far as I know, only TELCO has been granted this exemption.

This exemption is typically granted for a maximum of one year and can be renewed for an additional year upon application.

Kindly suggest.

Regards.

Not only Telco, many others like L&T also go for specific factories. However, a small hospital has no way of meeting the requirements. The cost for you to set up and pay for such a facility will be too high in any case. Health care insurance mainly means hospitalization benefit. ESIC covers much more. Are you in a position to provide full OPD, medicines, and complete hospitalization facilities for the entire family of the employee to unlimited amounts? Also, cover the full cost of maternity expenses and leave salary to unlimited amounts?

Understanding ESIC Requirements

ESIC is not an obligatory premium-paid scheme. It provides social security to the insured persons (IP) and their family members, both in cash and medical benefits. If you are employing 10 or more employees in your company, it is mandatory to register your company under the provisions of the ESI Act.

As for the question of exemption, it is not very easy to obtain an exemption from the government. I duly agree with the view of Mr. Banerjee as posted above.

Regards,
R. B. Yadav
Advocate

Exemption from ESI for Large Companies

As indicated here, there are many companies that have been exempted from ESI as they offer better facilities. These are big companies in the public and private sectors that employ thousands of employees. They have their own township and medical facilities, including several health centers/dispensaries, full-fledged hospitals with more than a hundred beds, OPD, ICU, emergency/casualty, ambulance services, and several specialized departments like Surgery, Orthopedics, Burn unit, Ophthalmology, Cardiac, Gynecology, Pediatrics, etc.

For small companies employing a few hundred employees and not having their own full-fledged hospital and medical services, it is unthinkable to get an exemption.

Warm regards.

Clarification on ESI Benefits and Exemption

Most have answered more or less correctly. Let me clarify that ESI is not merely medical care for entire dependents, but also includes up to 91 days of sick leave, a higher level of sick leave compensation for long-term sickness for a longer period, disability pension, death pension, and so on. If you have a contractual scheme covering all these benefits comparable or superior to benefits under the ESI scheme for all regular, temporary, and contractual workers, you are entitled to get an exemption. You need to establish the availability of all these benefits to all categories of workers as a matter of right. Under a contract, you can definitely get an exemption.

As for exemptions granted to some PSUs and very few private companies, none of them really had comparable benefits on a benefit-to-benefit basis, though they had fairly good medical care. Those exemptions were always political in nature and due to pressure from the trade union at a time when the ESIC facilities were too poor in those areas. Such politically motivated exemptions have also decreased since the delivery of ESI medical care and other benefits have improved, and trade unions have also realized that in cases of genuine long-term suffering, only ESI care can meet the needs.

It is not worth chasing the exemption. Instead, educate your workers, get them multiple identity cards for self and family residing elsewhere, give the briefing and handout about various benefits, and how to avail them in case of any misfortune, and collectively take up shortcomings in ESI facilities with higher-ups.

Regards,
O Abdul Hameed
Formerly Addl Commissioner ESIC
[Email Removed For Privacy Reasons]

Friends,

Most have answered more or less correctly. Let me clarify that ESI is not merely medical care for entire dependents, but also up to 91 days of sick leave, a higher level of sick leave compensation for long-term sickness for a longer period, disability pension, death pension, and so on. If you have a contractual scheme covering all these benefits comparable or superior to benefits under the ESI scheme for all regular, temporary, and contractual workers, you are entitled to get an exemption. You need to establish the availability of all these benefits to all categories of workers, as a matter of right. Under a contract, you can definitely get an exemption. As for exemptions granted to some PSUs and very few private companies, none of them really had comparable benefits on a benefit-to-benefit basis, though they had fairly good medical care. Those exemptions were always political in nature and due to pressure from the trade union at a time when the ESIC facilities were too poor in those areas. Such politically motivated exemptions have also decreased since the delivery of ESI medical care and other benefits has improved, and trade unions have also realized that in cases of genuine long-term suffering, only ESI care can meet the needs.

It is not worth chasing the exemption. Instead, educate your workers, get them multiple identity cards for self and family residing elsewhere, give them a briefing and handout about various benefits, and how to avail them in case of any misfortune, and collectively take up shortcomings in ESI facilities with higher-ups.

O Abdul Hameed
Formerly Additional Commissioner ESIC
[Email Removed For Privacy Reasons]

Dear sir,

The Way ESI is Granting Exemption Under Sec. 87

The way ESI is granting exemption under Sec. 87 is funny. Based on the report of the D.L. officer, after obtaining consent from the union, the regional committee will notify exemption. E.g., K.S.E.B. But by defeating the object, ESI used to exempt. But at present, exception is slightly difficult. The DLO's even do not know what recommendations he makes except the filling up of the annexure. Can you cite a few examples wherein genuine exemptions were granted based on benefits including dependent benefits extended? E.g., KSEB, whether contract employees are having dependent benefit? Did any of the union challenge the exemptions granted? If not as an authority, did you educate them to take up, etc.

Anil Narayan, Advocate

I agree with you that the exemption granted from the ESI Scheme has always been illegal, improper, and against all norms. This was my experience as Director of Scheme in four different states from West Bengal to Kerala. Please note that exemptions are granted by the State Government and in the Central sector by the Central Government, and the role of the ESI department is only to give their comments. In almost all cases, the ESI department has objected to exemptions based on comparative statements filed by the employers. I have not seen a single case where exemption was eligible based on statutory norms, since in none of the cases, including Central and State PSUs or such good employers like TELCO, had all the benefits comparable to the ESI Scheme, and whatever is eligible for regular workers was not available for contract and casual employees. I know of KSEB where contract workers are working for years together and are not eligible for those benefits available to KSEB regular employees or benefits under ESI or EPF, flouting the Supreme Court judgments. In fact, all the difficult and dangerous jobs like line shifting and laying lines are done by these contract employees. Exemption has been political or under suspected corrupt motives or such influence. For example, I know of one case where a PSU was fighting against ESIC for years together till the Supreme Court on the question of coverage and finally they lost the case, and when arrears were due, they filed for exemption and HC directed them to the Government, as laid down in the act, and the Government, in spite of strong written objections, granted exemption. DLO or even the Regional boards have no role in exemption, but the State Government uses them as a shield. In many of the cooperative textile units in Kerala, exemptions were granted, denying employees the ESI benefits, when they were not even getting an annual bonus or decent wages since all these units were controlled by one or other political parties. At least the recent amendment in the law has restricted retrospective exemption.

In fact, the role of trade unions has been very disappointing whether it is exemption, demanding satisfactory benefits, or stopping child labor in Sivakasi! The trade union represented only the regular employees in well-established companies and focused only on monetary benefits. I am not aware of any trade union agitation against the very poor primary medical care facilities under the ESIC scheme in states like West Bengal or Kerala, where the trade union is known to be strong. The primary medical care in states like Kerala, West Bengal, and the Hindi belt continues to be extremely poor even though the workers are paying for it, and in many places, the free primary care hospital of the State Government is much better. I fail to understand why this situation exists when the ESIC has a huge surplus and over 12,000 Crores are being spent to set up medical colleges all over India, when setting up a medical college is not the duty of ESIC.

Notwithstanding many shortcomings and maladministration, I hold the view that the ESIC scheme combined with EPF is two of the finest social security benefits comparable to the best in the world. What I expect from the Trade Union is to ensure that all the workers, including temporary, casual, and contractor workers, are brought under the scheme as stipulated in the law, force the government to extend the scheme to new areas and new sectors, and then fight locally to ensure that the committed benefits are available to workers at all times and in a decent manner concentrating more on primary medical care, and fighting against wasteful and needless expenditure and corruption.

Regards,
O. Abdul Hameed

Formerly Additional Commissioner ESIC

[Email Removed For Privacy Reasons]