Navigating ESI and WC Act: What Happens When Employee Wages Exceed Rs. 21,000?

Wage Ceiling and Coverage Under ESI and WC Acts

The wage ceiling prescribed for coverage of an employee is Rs. 21,000 per month under the Employees' State Insurance (ESI) Act, 1948. Our company is covered under ESI. All employees whose wages are below or equal to Rs. 21,000 are enrolled under ESI.

(i) If the wages of an employee exceed Rs. 21,000, can he be covered under the Workmen's Compensation (WC) Act, 1923?

(ii) Is the WC Act, 1923 applicable to employees whose wages exceed Rs. 21,000 even though our company is covered under ESI?

(iii) What insurance-related benefits are applicable to employees whose wages exceed Rs. 21,000 if they meet with an accident or get injured?

(iv) May an employer enroll employees whose wages exceed Rs. 21,000 under private medical health insurance?

Or

(v) May an employer take a WC Policy for employees whose wages exceed Rs. 21,000?

Understanding Employer's Liability for Employee Compensation

What are your apprehensions or doubts? Let us clarify. All employers are liable to compensate employees, irrespective of their salary, for any loss caused by accidents during the course of business. This compensation includes cases of death or permanent disablement. The compensation amount is determined based on the loss of income due to disablement or death, linked to the employee's monthly wages and age. Generally, higher wages lead to higher compensation, while a younger employee's loss of income to the family would result in higher compensation compared to an older employee.

Insurance as a Financial Safeguard

To alleviate heavy financial burdens or prevent capital depletion, a responsible employer would opt for insurance. In such cases, the insurance company would provide compensation to the legal heirs of a deceased employee. The insurance company applies two conditions: there is a salary ceiling for calculating compensation, set at a maximum of Rs 8000 per month, but anyone, regardless of salary, can be insured against employment injuries.

Role of the ESI Corporation

The role of the insurance company is now assumed by the ESI Corporation. The ESIC has a condition that it will handle compensation for individuals whose salary does not exceed Rs 21000. Consequently, the ESIC relieves the employer of the obligation to pay workmen's compensation for employees earning up to Rs 21000. For employees earning more, the employer must seek coverage from other insurers, such as Insurance company A, B, or C.

Mandatory ESI Coverage

Following the implementation of the ESI Act, coverage for employees earning up to a certain limit (Rs 21000 or less) has become mandatory. Employers are required to opt for the insurance offered by the ESIC. For those not covered by ESI, the employer must seek coverage from other insurance providers.

Coverage for Employees Exceeding the ESI Ceiling

While a company may be covered by the ESI Act, not all employees are automatically covered. Only those with salaries below the ceiling prescribed by the ESIC are covered by ESI schemes. It is crucial that all companies take out policies to cover employees whose salaries exceed Rs 21000, as the company's liability under the Employees Compensation Act is shifted to the ESI Corporation for those not covered by ESI.