The government has provided workers in India with several health and social security schemes. Mostly the objective of these social schemes is to safeguard their interest and also ensure their welfare during contingencies. Employee State Insurance ESI and worker compensation WC are two such significant social security schemes with several benefits for workers, their family members and also for employers. Although there are many similarities in terms of benefits, there are also some major differences in functionality of both policies.
Planning to take welfare measures for your workers? Wondering as to which policy out of these two – ESI scheme and WC applicable to your organization? Take a look below.
The number and the type of employees engaged in your business determine which of the two policy suits best. Additionally, the type of job and the monthly wages of employees determine the benefits provided by these two schemes.
Major relevancy differences between ESI and WC
Following table gives you a fair idea of conditions for relevancy of both the legislations:
| sr. # | ESI conditions | WC conditions |
| 1. | Organisation is a non-seasonal organization and factory | Any organisation employing persons in menial jobs (other than clerical capacity) |
| 2. | The organization employs more than 20 employees | Any number of such workers employed |
| 3. | The monthly wage for the employees is not more than Rs. 21,000 (w.e.f. 1stjan 2017) | The maximum monthly wage considered for benefits calculation is only Rs. 8000 |
| 4. | Applicable to the Indian workforce only | Applicable to workers employed in foreign countries by Indian employers only |
| 5. | However, currently not applicable to Manipur, Sikkim, Arunachal Pradesh, and Mizoram | However, applies across India |
Usually, if you don’t have a group health policy and your employees are not eligible for one, Employee State Insurance might be applicable. You should know about the difficulties and benefits of the ESI Act, regulated by the Employees’ State Insurance Act of 1948 by the Government of India.
The ESI Act is a key legislation in India that establishes social insurance schemes. It provides medical and financial benefits to eligible employees.
To know more about the compensation in the worker compensation act see How to Calculate a Settlement in a Workman’s Comp Injury?
Case on WC and ESI Relevancy
For instance, Source Mobile Pvt. Ltd. is an automobile parts manufacturing firm. Moreover, it employs a total of 50 workers in different capacities. Out of this 50, 20 are contract workers. Moreover, only 10 people are involved in office and sales roles, and they are not involved in making or delivering goods.
Thus, Source Mobile also covers these employees in the following manner:
| Job role | # of employees | to be covered under… |
| Sales and finance with salary less than Rs. 21,000 p.m also covered | 8 | esi@ |
| Sales and finance with salary more than Rs. 21,000 p.m are also covered | 2 | group health policy |
| Permanent employees as involved in the manufacturing process, delivery, loading a and unloading of goods, with monthly wages less than Rs. 21,000 | 15 | esi@ |
| Permanent employees as involved in the manufacturing process, delivery, loading and unloading of goods, with monthly wages more than Rs. 21,000 | 5 | Group health and personal accident policies also provided |
| Contract workers# involved in manufacturing process, delivery, loading and unloading of goods | 20 | workmen compensation insurance |
Health & disability benefits
But, the WC policy provides health and disability benefits regardless of how much the employer pays the workers.
But the employer is liable to pay benefits only as per the maximum salary of Rs. 8000 per month. However, the employer may pay a higher compensation it feels suitable.
Thus, one can state that any medium-sized or large firm could qualify for both ESI and WC. Yet, the main difference is that ESI is its own insurance, where both the employer and the employee only need to pay the premium.
Meanwhile, the WC is also pure liability coverage. Furthermore, the employer pays the premium to cover workers under workmen’s compensation insurance.
Hence, the employer solely bears the cost of the WC insurance policy. But in the case of ESI, the employer, as well as the employee, contributes towards the policy cost.
Furthermore, ESI provides benefits such as healthcare and maternity support that Workmen Compensation does not cover. Workmen compensation only covers lost income from workplace disability and injury, while ESI takes care of health treatments, including those for unrelated illnesses.
Difference in policy assignee
Hence, companies that employ “workmen” as defined by the Workmen Compensation Act, 1923, can purchase the WC policy. Thus, organizations that engage the services of labourers, drivers, and construction workers can buy and claim WC benefits. Moreover, workers engaged in engineering, manufacturing, mining, farming, and other manual jobs can also choose this WC policy.
On the other hand, employers in non-seasonal business units with less than 10 employees can buy ESI. Furthermore, this policy is applicable for restaurants, transport undertaking, newspaper unit, cinemas and so on.
Besides, there is a difference in compensation awarded under ESI and WC. The latter clearly entitles workmen to receive compensation. In case of workplace injury, accidents or death because of employment injury. ESI Corporation offers a full social program for employees and their families, including healthcare and financial support.
For better clarity see “What are the features of Workmen Compensation Policy?”
About The Author
Rahul Kumar
MBA Finance
With a wealth of experience in the insurance industry, Rahul is a seasoned writer specializing in articles related to workmen compensation policies (WC policies) for SecureNow. With 12 years of experience in the field, he has acquired in-depth knowledge and expertise in workmen compensation insurance, understanding its complexities and nuances. Their insightful articles provide valuable insights into the importance of WC policies for businesses and employees alike, offering practical advice and guidance on navigating the intricacies of insurance coverage. Trust him to deliver informative and engaging content, backed by years of experience and a passion for educating readers about insurance-related topics.
