UNIT 3

Social Legislation

3.1 Employee State Insurance Act, 1948

The Employees State Insurance Act gives social security benefits to employees. This act was passed in India after independence. It's came into force from 19 April 1948. By passing this act government has introduced scheme of insurance for employees. The funds required for their functioning of the scheme are raised from employers' and employees' contributions, grants, donations and gifts from governments, local bodies, and individuals or corporate.

Definition

Employee [Sec. 2(9)]:  "Employee" means any person employed for wages in or in connection with the work of a factory or establishment to which is Act applies and-

(i) Who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or

(ii) Who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or

(iii) Whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; and includes -

•Any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment;

•Or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment;

But does not include-

(a) Any member of the Indian naval, military or air forces; or

(b) Any person so employed whose wages excluding remuneration for overtime work exceed such wages as may be prescribed by the Central Government.

Provided that an employee whose wages excluding remuneration for overtime work exceed such wages as may be prescribed by the Central Government at any time after and not before the beginning of the contribution period, shall continue to be an employee until the end of that period.

The earlier wage limit for coverage under this act is 15,000/-per month, excluding overtime wages. In September 2016 ESIC raised wage limit from 15000/-to 21000/-per month.

The monthly wage limit in respect of a person with disability employed w.e.f. 1.4.2008 is 25,000/- for the purpose of Employer's share of contribution will be borne by the government for three years.

Family [Sec. 2(11]): "Family" means all or any of the following relatives of an insured person, namely:

(i) A spouse;

(ii) A minor legitimate or adopted child dependent upon the insured

(iii) A child who is wholly dependent on the earnings of the insured person and who is (a) receiving education, till he or she attains the age of twenty-one years, (b) an unmarried daughter

(iv) A child who is infirm by reason of any physical or mental abnormality or injury and is wholly dependent on the earnings of the insured person, so long as the infirmity continues;

(v) Dependent parents;

Factory [Sec. 2(12)]: "Factory" means any premises including the precincts thereof -

(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or

(b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without i the aid of power or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed.

Immediate Employer Sec. 2(13): "Immediate employer in relation to employees employed by or through him, means a person who has undertaken the execution, on the premises of factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory or establishment of the principal employer or is preliminary to the work carried on in, or incidental to the purpose of, any such factory or establishment, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer and includes a contractor.

Insurable Employment [Sec. 2(13A)]: "Insurable employment" means an employment in a factory or establishment to which this Act applies.

Insured Person [Sec. 2(14)]: "Insured person" means a person who is or was an employee in respect of whom contributions are or were payable under this Act and who is, by reason thereof, entitled to any of the benefits provided by this Act;

Principal Employer [Sec. 2(17)]: "Principal employer" means -

(i) In a factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948), the person so named.

(ii) In any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed, the head of the department.

(iii) In any other establishment, any person responsible for the supervision

and control of the establishment.

Seasonal Factory [Sec. 2(19A)]: "Seasonal factory" means a factory which is exclusively engaged in one or more of the following manufacturing processes, namely, cotton ginning, cotton or jute pressing, decortications of groundnuts, the manufacture of coffee, indigo, lac, rubber, sugar or tea or any manufacturing process which is incidental to or connected with any of the aforesaid processes and includes a factory which is engaged for a period not exceeding seven months in a year

(a) In any process of blending, packing or repacking of tea or coffee; or

(b) In such other manufacturing process as the Central Government may, by notification in the Official Gazette, specify.

Wages [Sec. 2(22)]: "Wages" means all remuneration paid or payable in Cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or lay-off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include-

(a) Any travelling allowance or the value of any travelling concession

(b) Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or

(c) Any gratuity payable on discharge.

Wage Period [Sec. 2(23)]: "Wage period" in relation to an employee means the period in respect of which wages are ordinarily payable to him whether in terms of the contract of employment, express or implied or otherwise. "

EMPLOYEES' STATE INSURANCE CORPORATION (SEC. 3, 4, 5)

Central government has established administrative body for administrator of ESl scheme as per this act and i.e. called as Employees' State Insurance Corporation.

The Corporation shall be a body corporate by the name of Employees' State Insurance Corporation having perpetual succession and a common sea and shall by the said name sue and be sued.

CONSTITUTION OF CORPORATION (Sec. 4)

The Corporation shall consist of the following members, namely:

(a) A Chairman to be appointed by the Central Government;

(b) A Vice-Chairman to be appointed by the Central Government;

(c) Not more than five persons to be appointed by the Central Government.

(d) One person each representing each of the States in which this Act is in force to be appointed by the State Government concerned;

(e) One person to be appointed by the Central Government to represent the Union territories;

(f) Persons representing employers to be appointed by the Central Government in consultation with such organizations of employers as may be recognized for the purpose by the Central Government;

(g) Ten persons representing employees to be appointed by the Central Government in consultation with such organizations of employees as may be recognized for the purpose by the Central Government;

(h) Two persons representing the medical profession to be appointed by the Central Government in consultation with such organizations of medical practitioners as may be recognized for the purpose by the Central Government

(i) Three members of Parliament of whom two shall be members of the House of the People (Lok Sabha) and one shall be a member of the Council of States (Rajya Sabha) elected respectively by the members of the House of the people and the members of the Council of States;

(j) The Director General of the Corporation, ex officio.

• TERM OF OFFICE OF MEMBERS OF THE CORPORATION (Sec. 5)

1. Save as otherwise expressly provided in this Act, the term of office of members of the Corporation, other than the members referred to in clauses (a), (b), (c), (d) and (e) of section 4 and the ex officio member, shall be four years commencing from the date on which their appointment or election is notified.

2. Members of the corporation after the expiry of the said period of four years continue to hold office until the appointment or election of his successor is notified.

3. The members of the Corporation referred to in clauses (a), (b), (c), (d) and (e) of section 4 shall hold office during the pleasure of the Government appointing them.

ESI CONTRIBUTION

1. Sec. 2 (4) defines "contribution" means the sum of money payable to the Corporation by the principal employer in respect of an employee and includes any amount payable by or on behalf of the employee in accordance with the provisions of this Act.

2. Employer and Employee both are contributing to the ESI fund and rate of contribution is 4.75 percent from employer and 1.75 percent from employee.

3. First Contribution period is 1st April to 30th September. For this contribution period benefit period is from 1t January to 30th June of the following year.

4. Second contribution period is from 1st October to 31st March. For this second contribution period benefit period is from 1s July to 31st December of the following year.

For Example: If employee joined insurance firm for first time, say on 5th January, his first contribution period will be from 5th January to 31st March and his corresponding first benefit will be from 5th October to 31st December.

5. The total amount of contribution (employee's share and employer's share) is to be deposited with the authorized bank through a challan in the prescribed form in quadruplicate on or before 21st of month following the calendar month in which the wages fall due.

6. Every principal employer who is covered under this act is liable to pay employer s and employee's contribution. He has right to deduct the employee’s contribution from his wages payable to him.

7. If employee’s average daily wages are less than 100/- per day, employee' s contribution is not necessary to pay. But the employer’s contribution i.e. 4.75 % of the wages is necessary to pay by employer.

STANDING COMMITTEE

• CONSTITUTION OF STANDING COMMITTEE (Sec. 8)

A Standing Committee of the Corporation shall be constituted from among its members, consisting of -

(a) A Chairman, appointed by the Central Government;

(b) Three members of the Corporation, appointed by the Central Government;

(c) Three members of the Corporation representing such three State Governments thereon as the Central Government may, by notification in the Official Gazette, specify from time to time;

(d) Eight members elected by the Corporation as follows:

(i) Three members from among the members of the corporation representing employers;

(ii) Three members from among the members of the Corporation representing employees;

(iii) One member from among the members of the Corporation representing the medical profession; and

(iv) One member from among the members of the Corporation elected by Parliament;

(e) The Director General of the Corporation, ex officio.

• TERM OF OFFICE OF MEMBERS OF STANDING COMMITTEE (Sec. 9)

1. Member mentions in the above section 8 from a to c can hold the office for the period of 2 years.

2. Members of the standing committee after the expiry of the said period of two years continue to hold office until the appointment or election of his successor is notified.

3. Member of the Standing Committee shall cease to hold office when he ceases to be a member of the Corporation.

4. A member of the Standing Committee referred to in point a, b, and c of section 8 shall hold office during the pleasure of the Central Government.

POWERS OF THE STANDING COMMITTEE (Sec. 18)

(1) Subject to the general superintendence and control of the Corporation, the Standing Committee shall administer the affairs of the Corporation and may exercise any of the powers and perform any of the functions of the Corporation.

(2) The Standing Committee shall submit for the consideration and decision of the Corporation all such cases and matters as may be specified in the regulations made in this behalf.

(3) The Standing Committee may, in its discretion, submit any other case or matter for the decision of the Corporation.

3.2 Miscellaneous Provision Act, 1948

Provident fund is a scheme by the Government of India by which of fixed percentage is deducted from employee salary in a fixed percentage added by the employer in your PF account.

This amount is kept in an account come up which accumulates and is then received back after retirement.

point is basically a retirement benefit scheme. Under the scheme a stipulated sum is deducted from the salary of the employee as his contribution towards the fund. The accumulated sum along with the interest is paid to the employee at the time of his retirement or resignation. In case of death of the employee the accumulated balance is paid to his legal heirs.

• EMPLOYEES PROVIDENT FUND SCHEME

The Central Government as framed a Scheme called Employees Provident Fund Scheme. The Fund vests in and is administered by the Central Board constituted undersection 5A

• Eligibility of an Employee:

• Enrolment: An employee is eligible for membership from the day he joins the covered establishment.

• If the employee s emoluments exceed Rupees 6,500/- per month, he has the option to join the Scheme(s) with the consent of employer. • Declare previous employment details, if any, in Form No. 11 to the employer.

• On becoming a member of the Schemes file details in Form No. 2(family particulars/nominations) through the employer.

• Rate of contribution payable by a member shall be @ 12% of his emoluments.

• A member can contribute statutorily over and above the prescribed rate.

• Any person who is disabled employee as per this act and working in the private sector, with monthly wages up to Rupees 25,000/-p.m. provided and if they are appointed on or after 1 April 2008.

• Any person who is international worker as per this act.

• Contribution:

In respect of establishments employing 20 or more persons and engaged in industry notified under Section 6 of Act (other than the Establishments declared as sick) rate of contribution is 12% of the basic pay plus DA, cash value of food concession and retaining allowance, if any, subject to a maximum of rupee 6,500/- per month. Voluntary higher contributions are also acceptable at the joint request of the member and the employer. As per this scheme employer and employee both have to pay contribution to provident fund. Employer's contribution is 12% and employee’s contribution is also 12% of the basic pay plus DA and retaining allowances if any.

• Amendments in Provident Fund Contribution:

In the union budget 2018, the EPF contribution rate for the newly recruited female employees has been reduced from 12% to 8%. This privilege will be available to the new female employees for the first three years of employment.

However, the rate of contribution is 10% in respect of the following categories of establishments:

• Any establishment covered prior to 22.9.97 in which less than 20 persons are employed.

• Any sick industrial company as defined in Clause (O) of Sub-Section l) of Section 3 of the sick industrial companies (special provisions) Act 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction.

• Any Establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.

• Any Establishment engaged in manufacturing of (a) Jute, (b) Beedi, (c) Brick, (d) Coir (other than spinning sector), (e) Guar Gum Industries/Factories.

The employer is responsible for paying the payment of the contribution on behalf of himself as well as employee.

The employer can deduct employee's share of contribution from his wages and transfer to his PF account. But employer cannot deduct his own share of contribution from employee s wages or any other benefits like pension gratuity or provident fund of an employee.

Employer is also liable to pay administrative charges as per this act.

If employer makes default in payment of any contribution to the fund than he is liable to pay damages Simple interest @ 12% per annum is also charged separately on delayed payment of contribution.

Where the amount of any contribution payable under this Act involves fraction of a rupee the Scheme may provide for the rounding off of such fraction to the nearest rupee half of a rupee or quarter to a rupee.

• Withdrawals from Provident Fund:

• Full withdrawals-

The PF Scheme specifies the circumstances in which an employee is entitle to withdraw the accumulated amounts (with interest thereon) in the Provident Fund. Such circumstances include:

i. Upon retirement from service after attaining the age of 55 (fifty-five) years;

ii. Upon retirement from service on account of permanent and total incapacity for work due to bodily or mental infirmity;

iii. Immediately before migration from India for permanent settlement abroad or for taking employment abroad;

iv. On termination of service in case of mass or individual retrenchment;

v. On termination of service under a voluntary scheme of retirement framed by the employer and the employees under a mutual agreement;

vi. Under certain contingencies such as transfer to another establishment not covered under the PF Act; and

vii. Upon cessation of employment with any Covered Establishment provided the employee has not been employed in any Covered Establishment for a period of not 34 less than 2 (two) months immediately preceding the date on which he makes the application for withdrawal.

• Partial Withdrawals or Advances:

After completing 5 to7 years of membership and fulfilling other applicable conditions necessary for particular type of withdrawals, a member of Provident Fund is allowed Non Refundable withdrawals or advances for the following purposes:

1. Non-refundable advance for payment of premia towards a policy or policies of Life Insurance of a member;

2. Withdrawal for purchasing a dwelling house or flat or for construction of a dwelling house including the acquisition of a suitable site for the purpose, or for completing/continuing the construction of a dwelling house, already commenced by the member or the spouse and an additional advance for additions, alteration or substantial improvement necessary to the dwelling house;

3. Non-refundable advance to members due to temporary closure of any factory or establishment for more than fifteen days, for reasons other than a strike or due to non-receipt of wages for 2 months or more, and refundable advance due to closure of the factory or establishment for more than six months;

4.  (i) Non-refund able in case of:

(a) Hospitalization lasting one month or more, or (b) major surgical operation in a hospital, or

(c) Suffering from T.B. Leprosy, Paralysis, Cancer, Mental derangement or heart ailment, for the treatment of which leave has been granted by the employer;

(ii) Non-refundable advance for the treatment of a member of his family, who has been hospitalized or requires hospitalization, for one month or more:

(a) For a major surgical operation; or

(b) For the treatment of T.B., Leprosy, and Paralysis, Cancer, mental derangement or heart ailment:

(5) Non-refundable advance for daughter/sons marriage, self-marriage, the marriage of sister/brother or for the post matriculation education of son or daughter;

(6) Non-refundable advance to members affected by cut in the supply of electricity;

(7) Non-refundable advance in case property is damaged by a calamity of exceptional nature such as floods, earthquakes or riots;

(8) Withdrawals for repayment of loans in special cases; and

(9) Non-refundable advance to physically handicapped members for purchasing equipment required to minimize the hardship on account of handicap.

EMPLOYEES' DEPOSIT-LINKED INSURANCE SCHEME

The Act was amended in 1976 and a new Section 6C was inserted empowering the Central Government to frame a Scheme to be called the Employees Deposit-Linked Insurance Scheme for the purpose of life insurance benefit to the employees of any establishment or class of establishments to which the Act is applicable.

The Central Government has accordingly framed the Employees Deposits Linked Insurance Scheme, 1976. It came into force on the 1st August, 1976.

1.  Application of the Scheme: The Employees Deposit-Linked Insurance Scheme, 1976 is applicable to all factories/establishments to which the Employees' Provident Funds and Miscellaneous Provisions Act 1952 apply.

All the employees who are members of the Provident Funds in both the exempted and the unexampled establishments are covered under the scheme.

2. Rate of Contributions: The employees are not required to contributed to the Insurance Fund; The employers are required to pay contributions to the Insurance Fund at the rate of 0.5% of the total emoluments, i.e. basic wages, dearness allowance including, cash value of any food concession and retaining allowance, if any.

3. Administrative Expenses: The employers of all covered establishments are required to pay charges to the insurance fund, at the rate of 0.01 % of the pay of the employee-members for meeting the administrative charges.

4. Nomination: The nomination made by a member under the Employee Provident Fund Scheme 1952 or in the exempted provident fund is treated as nomination under this scheme. No nomination can be made under this act in favour of a person who is not a member of the 'Family as per the definition of 'Family' in this act. If he has no family than he can nominate any person or persons of his choice but if he subsequently acquires a family, such nomination becomes invalid and he will have to make fresh nomination of one or more persons belonging to his family. A nomination can be modified by the member at any time.

5. Payment of Assurance Benefit: In case of death of a member, an amount equal to the average balance in the account of the deceased during the preceding 12 months or period of membership, whichever is less shall be paid to the persons eligible to receive the amount or the Provident Fund accumulations. In case the average balance exceeds 50,000, the amount payable shall be rupees 50,000 plus 40% of the amount of such excess subject to a ceiling of one lakh.

6. Exemption from the Scheme: Factories/establishments, which have an Insurance Scheme conferring more benefits than those provided under the statutory Scheme, may be granted exemption, subject to certain conditions, if majority of the employees are in favour of such exemptions

ADMINISTRATIVE BODIES AS PER THIS ACT

• Central Board (Sec. 5a)

(1) The Central Government may by notification in the Official Gazette constitute with effect from such date as may be specified therein a Board of Trustees for the territories to which this Act extends. This Board of trustees is called as Central Board. It is consisting of the following persons as members namely:

(a) A Chairman and a Vice-Chairman to be appointed by the Central Government;

(b) The Central Provident Fund Commissioner ex officio;

(c) Not more than five persons appointed by the Central Government from amongst its officials:

(d) Not more than fifteen persons representing Governments of such States as the Central Government may specify in this behalf appointed by the Central Government;

(e) ten persons representing employers of the establishments to which the Scheme applies appointed by the Central Government after consultation with such organisations of employers as may be recognized by the Central Government in this behalf; and

(f) Ten persons representing employees in the establishments to which the Scheme applies appointed by the Central Government after consultation with such organisations of employees as may be recognized by the Central Government in this behalf.

(2) The terms and conditions subject to which a member of the Central Board may be appointed and the time place and procedure of the meetings of the Central Board shall be such as may be provided for in the Scheme.

(3) The Central Board shall subject to the provisions of section 6A and section 6C administer the fund vested in it in such manner as may be specified in the Scheme.

(4) The Central Board shall perform such other functions as it may be required to perform by or under any provisions of Scheme Family Pension Scheme and the Insurance Scheme.

(5) The Central Board shall maintain proper accounts of its income and expenditure in such form and in such manner as the Central Government may after consultation with the Comptroller and Auditor-General of India specify in the Scheme.

(6) The accounts of the Central Board shall be audited annually by the Comptroller and Auditor-General of India and any expenditure incurred by him in connection with such audit shall be payable by the Central Board to the Comptroller and Auditor-General of India.

(7) The Comptroller and Auditor-General of India and any person appointed by him in connection with the audit of the accounts of the Central Board shall have the same rights and privileges and authority in connection with such audit as the Comptroller and Auditor-General has in connection with the audit of Government accounts and in particular shall have the right to demand the production of books accounts connected vouchers documents and papers and inspect any of the offices of the Central Board.

(8) The accounts of the Central Board as certified by the Comptroller and Auditor-General of India or any other person appointment by him in this behalf together with the audit report thereon shall be forwarded to the Central Board which shall forward the same to the Central Government along with its comments on the report of the Comptroller and Auditor-General.

(9) It shall be the duty of the Central Board to submit also to the Central Government an annual report of its work and activities and the Central Government shall cause a copy of the annual report the audited accounts together with the report of the Comptroller and Auditor General of India and the comments of the Central Board thereon to be laid before each House of Parliament.

• Executive Committee (Sec. 5AA):

(1) The Central Government may by notification in the Official Gazette constitute with effect from such dates as may be specified therein an Executive Committee to assist the Central Board in the performance of its functions.

(2) The Executive Committee shall consist of the following persons as members namely

(a) A Chairman appointed by the Central Government from amongst the members of the Central Board;

(b) Two persons appointed by the Central Government from amongst the persons referred in sub-section (1) of section 5A;

(c) Three persons appointed by the Central Government from amongst the persons referred in sub-section (1) of section 5A;

(d) Three persons representing the employers elected by the Central Board from amongst the persons referred in sub-section (1) of section 5A;

(e) Three persons representing the employees elected by the Central Board from amongst the persons referred in sub-section (1) of section 5A;

(f) The Central Provident Fund Commissioner ex officio.

(3) The terms and conditions subject to which a member of the Central Board may be appointed or elected to the Executive Committee and the time place and procedure of the meetings of the Executive Committee shall be such as may be provided for in the Scheme.

• State Board (Sec. 5B)

(1) The Central Government may after consultation with the Government of any State by notification in the Official Gazette constitute for that State a Board of Trustees in such manner as may be provided for in the Scheme. This board of trustees is called as State Board.

(2) A State Board shall exercise such powers and perform such duties as the Central Government may assign to it from time to time.

(3) The terms and conditions subject to which a member of a State Board may be appointed and the time place and procedure of the meetings

of a State Board shall be such as may be provided for in the Scheme

Every Board of Trustee constituted under section 5A or section 5B shall be a body corporate under the name specified in the notification constituting it having perpetual succession and a common seal and shall by the said name sue and be sued.

REFERENCE:

1. LABOUR.GOV.IN
2. INDIANKANOON.ORG
3. INDIACODE.NIC.IN
4. CLC,GOV.IN