Benefits under the ESI Act, 1948 before & after 01.07.2011 A comparison

1. Welcome to the Presentation on the recent Amendments relating to Average Daily Wagesin the ESI (Central) Rules

2. Rule 2 (1) (1-A) of the ESI (Central) Rules, 1950, defines the term ‘average daily wages’ in a contribution period. This provision is meant for regulating the quantum of various Benefits provided under the Act. • There was, all of a sudden, an amendment to this provision and it came into effect from 01.07.2011. It was claimed that the amendment simplified the process. • But, the need for such simplification in the context of computerization of the process is not understandable. But, it has been done. • We may, therefore, examine the impact of that amendment in public interest.

3. Benefits under the ESI Act, 1948before &after01.07.2011A comparison

4. Benefit rates

8. Readers might, by now, have become aware that the employees receiving wages at the lower level like Rs. 5000 or Rs. 8000 etc., p.m. get less amount of benefit, from 01.07.2011 onwards, when they claim Sickness Benefit and Maternity Benefit. The employees in higher income group get less amount of benefit only for Maternity. But, all of them get more benefits for Disablement.

9. The primary issue is whether the ESI Corporation can cause an amendment to be made which results in the reduced quantum of benefits already paid by the Corporation. Did the employees’ representatives agree to the amendment of the term ‘average daily wages’ knowing full well these implications? The next issue is with reference to Sec. 61 of the ESI Act and the benefit provisions of the Maternity Benefit Act, 1961.

10. Sec. 61 of the ESI Act, 1948 bars the employees covered under the Act from receiving similar benefits under any other enactments. • Consequently, those who were covered under the ESI Act did not ask for benefits under the Maternity Benefit Act, 1961, so far.

11. Maternity Benefit Act, 1961 • But, now, from 1.7.2011 onwards, the quantum of benefit payment under the ESI Act became less and, therefore, the Maternity Benefit payable under the ESI Act has become less attractive, when compared to the benefit payable under the MB Act, 1961. • Sec. 61 of the ESI Act, literally, bars only ‘similar’ benefits. There is no phrase like ‘substantially similar’ in Sec. 61. • The issue now is whether the beneficiaries can ask for enforcement of M.B. Act provisions on the ground that those benefits are ‘superior’, as the beneficiaries get more benefits under that Act.

12. How does it happen? • The benefits payable both under the ESI Act and under the Maternity Benefit Act are with reference to the ‘average daily wages’ based on the ‘wages’ earned. • The ESI Act is not that liberal as the MB Act is when defining the term ‘wages’. The MB Act takes into account the “the money value of the concessional supply of foodgrains and other articles” also as wages. The ESI Act excludes from the term ‘wages’ any payment in kind. • So, one can see, even theoretically, that the MB Act has the in-built scope of paying more to the employees as Maternity Benefit on the basis of the average daily wages, especially after the removal of the 115% formula from 01.07.2011 in the ESI (Central) Rules, 1950. (See Sec. 3 (n) (3) of the MB Act and Sec. 2 (22) of the ESI Act) Note:That the MB Act excludes overtime payment while the ESI Act does not exclude it is, indeed, a relevant factor. But, overtime is never considered as a fixed remuneration but only as a variable one.

13. The concept behind the 115% formula • Contribution is always with reference to (a) the no. of days for which wages are paid or payable and (b) the various components of wages as defined specifically. • If there are unpaid holidays, those days are not taken into account, in ‘other-than-time-rated’ cases. • But, benefit must be paid to all the days of the month to facilitate sustenance of the Insured Person and his family members. • Hence the formula of 115% by taking cognizance of the extra 4 days in a month, in addition to the 26 days. • In a month of 30 days, the wages earned for 26 days are used by the employee for 30 days. • The extra 4 days is = 4/26 x 100 = 15%

14. Natural justice demands that no amendment should result in reduction of benefits, unless such reduction is actually contemplated and discussed openly before making such amendment. • In this case, no such intention of reduction of benefits appeared to have motivated the amendment. • Also, it seems that there was no intention to reduce the benefits indirectly without making it public. Or, was it?

15. Can the ESIC compel the insured population to opt for the Maternity Benefit only under the ESI Act, when the compensatorymechanism provided in the earlier definition of the term ‘Average Daily Wages’ has been removed from 01.07.2011? • Is the legal bar under Sec.61 legitimate? Enlightened opinions of the readers are invited!

16. The following 13 slides are only for those who want to know more on this matter. • Others can right-click on the screen and go to the last slide, directly.

17. History of Maternity Benefit Act • R.S. Asavle introduced a Private Member's Bill for Maternity Benefit in Mumbai in 1928. The Bombay Maternity Benefit Act was passed in 1929. Centre left the matter to Provinces. Central Province enacted law for Maternity Benefit in 1930. In Ajmer in 1933, in Chennai in 1935, in Bengal in 1937 and in the United Provinces in 1938. For more details: "The History of Doing: An illustrated Account of Movements for Women's Rights and feminism in India, 1800 -1990" by Radha Kumar- Zubaan Publishers.

18. Maternity Benefit Act, 1961 • Sec. 5. Right to payment of maternity benefit. -- (1) Subject to the provisions of this Act, every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence immediately preceding and including the day of her delivery and for the six weeks immediately following that day. • Explanation. – For the purpose of this sub-section, the average daily wage means the average of the woman’s wages payable to her for the days on which she has worked during the period of three calendar months immediately preceding the date from which she absents herself on account of maternity, or one rupee a day, whichever is higher.

19. Wages as per the MB Act, 1961 Sec. 3 (n): “wages” means all remuneration paid or payable in cash to a woman, if the terms of the contract of employment, express or implied, were fulfilled and includes – (1) such cash allowances (including dearness allowance and house rent allowance) as a woman is for the time being entitled to; (2) incentive bonus; and (3) the money value of the concessional supply of foodgrains and other articles, but does not include – (i) any bonus other than incentive bonus; (ii) overtime earnings and any deduction or payment made on account of fines; (iii) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the woman under any law for the time being in force; and (iv) any gratuity payable on the termination of service;

20. Average daily wages for the purpose of benefitsas per the ESI (Central) Rules, 1950from 01.07.2011 • (1-A) ― “Average daily wages” during a contribution period in respect of an employee, means the aggregate amount of wages payable to him during that period divided by the number of days for which such wages were payable ;

21. Average daily wages for the purpose of benefitsas per the ESI (Central) Rules, 1950up to 30.06.2011 1-A. “Average daily wages during a contribution period” means, in respect of any employee for the purpose of the daily rate of sickness benefit, maternity benefit, disablement benefit and dependant’s benefit,the sum equal to one hundred and fifteen per cent. of the aggregate amount of wages payable to him during that period, divided by the number of days (including paid holidays and leave days) for which such wages were payable.

22. Standard Benefit Rateas per the ESI (Central) Rules, 1950from 01.07.2011 • (7-A) ― “Standard benefit rate” means average daily wages obtained by dividing the total wages paid during the contribution period by the number of days for which these wages were paid ; • Note: The Standard Benefit Rate earlier, up to 30.06.2011, was with reference to the table in Rule 54.

23. Sickness Benefit

24. Sickness Benefitfrom 01.07.2011 • Wages Rs. 5000 p.m. • Standard Benefit Rate • 30000/ 183=163.93 • Sickness Benefit = Rs. 163.93x70% • One month sickness Benefit payable is = Rs. 115x30=3450

25. Sickness Benefit up to 30.06.2011 • Wages Rs. 5000 p.m. • Standard Benefit Rate Rs. 98 • Sickness Benefit = Rs. 98 + 20% • One month sickness • Sickness Benefit payable is = Rs. 117.60x30= 3528.00

26. Temporary Disablement Benefitfrom 01.07.2011 • Wages Rs. 5000 p.m. • ADW 30000 / 183 = 163.93 • So, the Standard Benefit Rate = 163.93 • TDB per day = 90% of 163.93 = 148

27. Temporary Disablement Benefitup to 30.06.2011 • Wages Rs. 5000 p.m. • Average Daily Wages = 30000 x 115% = 34500 divided by 183 = 188 • Standard Benefit Rate = Rs. 98 • TDB per day = 98+49= 147

28. Maternity Benefitfrom 01.07.2011 • Wages Rs. 5000 p.m. • Standard Benefit Rate Rs. 163.93 • Maternity Benefit = SBR = 164 • One month MB = 164x30 = 4920

29. Maternity Benefitup to 30.06.2011 • Wages Rs. 5000 p.m. • Standard Benefit Rate Rs. 98 • Maternity Benefit = SBR x 2 = 196 • One month MB = 196 x30 = 5880

30. Thankyou!