Labour Codes: #26 Labor Code ESI – Old vs New Provisions
A. Introduction
The Employee’s State Insurance Act, 1948 (“ESI Act”) which provides social security benefits to workers in the event of contingencies like sickness, maternity, disablement, occupational injury, or death during employment. It ensures that workers receive medical and financial protection to mitigate their wage loss and hardship. Over time, to reflect labor market changes (gig/platform work, evolving establishments, digitalization) and improve flexibility and enforcement, the Code on Social Security, 2020 (“SS Code”) and related amendments have introduced revised frameworks.
B. Comparison of the new and old provisions.
| Pointers | ESI Act | SS code |
| Applicability and Employee Thresh hold | Applied to factories and specified establishments employing ten (10) or more persons (or twenty (20) in some states).
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SS Code allows the Central Government to extend application to any class of establishments by notification, and to include gig/platform workers.
Central Govt may extend the ESI scheme to any area or class of establishments by notification. |
| Employee Coverage | Employee” under Sec. 2(9) excludes unorganised/gig workers. | Includes all employees and allows separate schemes for unorganised, gig, and platform workers |
| Wage ceiling | Wage ceiling was fixed by the Act for Rs.21,000 per month; and Rs. 25,000 for persons with disability) for eligibility. | Not specified, to be determined by the prescribed by notification Central Government. |
| Contribution rates | Employer 4.75% + Employee 1.75% = 6.5% (total), later reduced to 3.25% + 0.75%. | Not specified, to be determined by the prescribed by notification Central Government. |
| Authority | Administered by ESI Corporation under the Act | ESI Corporation continues as a statutory body with wider digital and enforcement powers |
| Benefits | Medical, sickness, maternity, disablement, dependents’, funeral benefits | Benefits retained and extended to new worker categories; portability and e-claims introduce |
| Enforcement and penalties | Registration process was manual or semi-online, often through regional ESIC offices and limited penalty provisions. | Digital and timebound compliance, All employees of the organized sector are mandatorily required to obtain ESI registration within ten (10) days of appointment.
, higher penalties (fines and imprisonment )for non-compliance. |
| Identification | Registration numbers were manually issued by ESIC.
No uniform or biometric identification system existed for employees. |
Enabled Aadhaar-based identification and authentication |
C. Key Impact:
1. Enhanced Coverage for employees: Even smaller or non-factory establishments may be brought under ESI once notified. Businesses using gig or platform models may eventually contribute to social security funds
2. Digital Governance and Ease of Compliance: Registration, contribution, and reporting will move to online integrated platform ensuring transparency and reduce administrative burden. Also reducing paperwork and enable quicker registration and contribution tracking.
3. Timely Compliance: Defined deadlines for contribution deposit and strict penalties promote financial discipline among employers. Non-compliance attracts higher penalties.