Can Employees Opt for Voluntary ESIC Deductions Above ₹15,000? Seeking Clarity on ESIC Act Provisions

Dear all, If an employee would like to deduct ESIC after crossing the monthly wage limit of more than ₹15,000 until his tenure in the company, is there any provision in the ESIC Act for the same as there is for PF, where voluntary PF is applicable if the limit is exceeded?

Regards,
Pranay Patil

In case of VPF, the contribution part is only similar to saving, which will fetch the prevailing rate of interest and nothing more than that. However, this Voluntary ESIC is not possible as it will have a more significant financial impact on the company. The employee's share of 1.75% and the employer's share of 4.75% are to be contributed. Even if the employee agrees to pay both parts from their salary, the employee can still utilize the leave benefits available for the ESI members.

Hence, please reconsider all aspects before implementing such a policy in your organization.

Regards

Social Security Schemes and Their Compulsory Nature

Social Security Schemes like the ESI Scheme under the ESI Act, 1948, and the rules/regulations framed thereunder are statutory and compulsory. There cannot be any element of option in its scope and implementation. If any element of option is introduced, the scheme will either reduce to being a commercial insurance scheme based on a specific contract between the insured, insurer/employer, and the insurance company or a social assistance program funded and controlled by the State.

Regards

ESI Act and Employer Liability

The ESI Act takes care of those who are covered under the Act. But what about those workers, clerks, supervisors, officers, etc., who are earning a salary of more than ₹15,000 per month and are therefore not covered under ESI? The employer has a liability under the EC Act. The ESI Act does not exempt the employer from his liability in respect of non-coverable employees. Hence, for those who are drawing above the ceiling, their contribution should be restricted up to the ceiling salary. This sort of regulation is much needed in the ESI to cover all employees on wages, with contributions restricted up to the ceiling.

Dear Kulkarni ji, I believe that your views in the above remarks regarding the line, "ESI Act does not exempt the employer from his liability in respect of non-coverable employees," do not align with the provisions of the ESI Act, 1948, and the rules/regulations framed thereunder.

Under the said Act and rules/regulations, there is no liability of the principal employer concerning employees not covered under the said Act. I hope that you would be willing to further elaborate on your views so that I can correct myself accordingly.

Dear Mehataji, Thanks for your post and query. The question is whether the ESI Act absolves the liability of the employer in respect of all of his employees. I think the answer is negative.

Question: Does the ESI Act Cancel the EC Act?

In other words, if the ESI Act applies to a factory, does the EC Act automatically become nullified? To answer this question, we need to consider the implication of Section 53 of the ESI Act.

Section 53 of the ESI Act is quoted for ready reference:

"53. Bar against receiving or recovering of compensation or damages under any other law - An insured person or his dependents shall not be entitled to receive or recover, whether from the employer of the insured person or from any other person, any compensation or damages under the Workman's Compensation Act, 1923 (8 of 1923) (now known as the EC Act), or any other law for the time being in force or otherwise, in respect of an employment injury sustained by the insured person as an employee under this Act."

Thus, the above provision restricts the insured person from claiming multiple benefits for the employment injury from the employer.

Case A: Application of ESI Act to a Factory

If the ESI Act applies to a factory, but certain persons drawing wages less than Rs. 15,000 per month are not insured under ESI, though eligible to be covered, can they file and claim compensation under the EC Act? The answer is yes. Reference may be made to the judgment of the Madras High Court in the case of Management of Bhavanji Mills v. Dy. Commissioner of Labour, Madurai and another reported in 2001 FJR page 185 = 2000-III, LLN page 315.

In the reported court case, a trainee died in an accident during employment, and his dependents claimed damages. The management argued that since the deceased was covered under the ESI Act, no compensation was payable under the EC Act. The High Court ruled that since the deceased's contribution was not paid under the ESI Act, a claim under the EC Act is maintainable.

Case B: Employees Earning Above Rs. 15,000

Employees who are drawing more than Rs. 15,000 per month and hence not covered under the ESI Act - in this situation, the analogy of Case A applies.

The provisions of the EC Act are of universal application, which impose a liability on the employer to pay compensation/damages for an employment injury as per the scheme of the EC Act. This is a basic feature of the EC Act. When the ESI Act is made applicable to a factory, it addresses the liability of the employer provided contributions are paid. However, the question remains about the liability of the employer in respect of those employees who are not covered under the ESI Act due to their high wages.

I do not find any difficulty in answering the question in the affirmative. I believe there is definitely a liability on the employer under the EC Act when workers are not covered under the ESI Act due to either the failure to cover by the employer or their contractor or due to wages above the ceiling of Rs. 15,000.

I hope I have elaborated on the point.

Thank you and wishing you a very Happy Diwali.

Regards,
Adv. K. H. Kulkarni

Liability for Employees Without ESI Coverage

So, who pays for the liability if employees earning more than $15,000 per month die at the workplace without having Employee State Insurance (ESI) coverage? Any comments, please.