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 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 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. Moreover, the nature of job and also the monthly wages of employees determine the policy benefits under these two schemes.
Major applicability differences between ESI and WC
Following table gives you a fair idea of conditions for applicability 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.||Monthly wage for the employees is not more than Rs. 21,000 (w.e.f. 1stjan 2017)||Maximum monthly wage considered for benefits calculation is only Rs. 8000|
|4.||Applicable to 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|
In most cases, if you do not have a group health policy, and your workforce is not eligible for the same, Employee State Insurance might apply. However, you should be aware of the challenges and advantages of ESI.
To know more about the compensation in worker compensation act see How to Calculate a Settlement in a Workman’s Comp Injury?
Case on WC and ESI Applicability
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, 10 are involved only in clerical jobs and sales functions and do not participate in manufacturing or goods delivery.
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
However, irrespective of the level of wages provided by the employer to workers, health and disability benefits are extended under the WC policy. 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 compensationas it feels suitable.
Therefore, it can be said that any medium size or large firm could be eligible for both ESI and WC. However, the major difference is that ESI is insurance itself, where the employer only needs to pay the premium along with the employee.
Meanwhile, the WC is also a pure liability coverage. Furthermore, workers can be insured under workmen compensation insurance, for which premium is payable by the employer only. Hence, the employer solely bears the cost of WC insurance policy. But in case of ESI, the employer as well as the employee contributes towards the policy cost.
Additionally, the benefits under ESI include healthcare and maternity benefits, which are not part of Workmen Compensation. Workmen compensation only takes care of the income lost due to disability and injury at the workplace, but ESI will take care of health and hospitalization for even unrelated illnesses.
Difference in policy beneficiaries
Therefore, employers of firms who engage “workmen” as defined by the Workmen Compensation Act, 1923 can buy the WC policy. Thus, organizations that engage the services of labourers, drivers, and constructionworkers can buy and claim WC benefits. In addition, labourers employed in engineering, manufacturing, mining, farming, and other menial jobs can also opt for 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 deaths. However, the ESI is a multi-dimensional social scheme providing medical care and financial security to employees and their family.
For better clarity see “What are the features of Workmen Compensation Policy?”