Enigmatic Amendment 2011 that affects the Benefits

There was, all of a sudden, an amendment, which came into force from 01.07.2011, stating that it was intended to simplify the term ‘average daily wages’ mentioned  in Rule 2 (1) (1-A) of the ESI (Central) Rules, 1950.  The definition in this sub-rule is meant for regulating the rates of various Benefits provided under the Act while the definition in in sub-rule 1-B is for deciding coverage.

The need for such simplification, after the vigorous efforts to computerize all works of the Branch Offices is not clear. But, the fact is that that amendment has reduced the rates of benefits which were available to the insured population up to 30.06.2011.

After 01.07.2011,

  1. the employees receiving wages at the lower level like Rs. 5000 or Rs. 8000 etc., p.m. get less amount when they seek two benefits, Sickness and Maternity;
  2. the employees in higher income group get less amount of benefit only for Maternity;
  3. but, all of them get more benefits for Disablement.

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.

Can there be reduction of benefits through indirect amendments without making the public aware of it through categorical proclamations, beforehand?

How can the bar under Sec. 61 of the ESI Act be justified, hereafter?

Readers are welcome to share their enlightened opinions!

Please Click on the small Presentation on Amendment that affects Benefits



Filed under Amendments 2010, Benefits, Powerpoints

3 responses to “Enigmatic Amendment 2011 that affects the Benefits

  1. NishaParveen

    If a child is born after 1-7-2012
    1) for an I.W. earning Rs, 5000 p.m. she will lose Rs. 2688 for 84 days, which is 53.76 % of her per month wage……
    2)for an I.W. earning Rs, 8000 p.m. she will lose Rs. 3948 for 84 days, which is 49.35 % of her per month wage……
    3) for an I.W. earning Rs, 10000 p.m. she will lose Rs. 4368 for 84 days, which is 43.68 % of her per month wage……
    4) for an I.W. earning Rs, 15000 p.m. she will lose Rs. 6552 for 84 days, which is 43.68 % of her per month wage……
    Which means that the less waged I.W. losses more than the higher waged I.W. …….

  2. The amendment was based on the recommendations of the Venkatesh Committee on ” Simplification of forms and procedures”, which reads as follows:Sub: – Simplification of Forms and Procedures- Suggestion for replacing the “Standard Benefit Rate table’ in Rule 54 of the ESI (Central) Rules, 1950”
    With simple procedure for calculation of ‘Daily rate’ of Cash benefit.

    Present Position: At present, for calculation of daily rate of cash benefit based on the return of contributions, the following cumbersome procedure is followed.

    Step 1: The total wages of an insured person in the Return of contribution is to be divided by the number of days for which such wages were paid/payable, to arrive at the average daily wages.

    Step 2: These average daily wages are to be enhanced to one hundred and fifteen percent as provided under Rule 2 (1-A) of the Central Rules.

    Step 3: Then, the enhanced average daily wages are to be fitted in to the ‘Average daily wages slab’ in the ‘Standard Benefit Rate table’ in Rule 54, to arrive at the ‘Standard Benefit Rate.

    Step 4: Then the Standard Benefit rate so arrived at is to be enhanced by one hundred and twenty percent for ‘Sickness Benefit’, one hundred and fifty percent for Disablement and Dependants’ Benefit and two hundred percent for ‘Maternity Benefit.

    If the Disablement/Dependants Benefit/Extended Sickness Benefit, is to be worked out on the basis of ESIC-32, it is based on ‘notional wages’, i.e. had the insured person worked for all the working days in the complete wage period, divided by 26 if he is monthly rated, 13 if he is fortnightly rated, 6if he is weekly rated, and 1 if he is daily rated as provided under Rule 2(1-B) of the Central rules.
    This is in place of Step1 above. After this exercise, all the other steps from 2 to 4 above are to be followed.
    Though, the ‘Ready Reckoner’ charts are prepared and supplied to the Dealing Assistants in the Branch Offices, this procedure is cumbersome, and not understood by the beneficiaries. The beneficiaries are not aware that a weightage of 15% is added to their average daily wages, before arriving at their daily rate of benefit. Therefore there is need to simplify this procedure.
    Let us see at present, what is the percentage of the cash benefit under the present procedure, before going for the new procedure.

    Example Average
    Daily wages in RC. Adding 15% Daily wage slab
    number Standard
    rate Daily rate of SB Daily rate of TDB/DB Daily rate of MB Percentage
    1. 50 57.5 7 30 36 45 60 72/90/120
    2. 100 115 15 58 69.6 87 116 69.6/87/116
    3. 150 172.5 21 88 105.6 132 176 70.4/88/117.3
    4. 206 236.9 28 125 150 187.5 250 72.8/91/121.4
    5. 255 293 33 150 180 225 300 70.6/88/117.6

    It may be seen from the above table that the Cash benefit in any category is not at uniform percentage to all. Sickness benefit rate is around 70% of the average daily wages, Disablement 88.8% and MB 118%.
    The Daily rate in the Standard Benefit table in the first schedule to the Act, at the beginning, was based on 50% of the lower slab.
    In the amendment Act 1968, it was made 50% of the mean average. i.e average of lower slab plus higher wage slab. In the next amendment, it was 50% of the higher wage slab.

    In the 1989 amendment, the first schedule was omitted (wef.1-2-91) and Rule 54 brought in to force from 01-2-1991.
    In this table, the Standard benefit rate is ensured at 50%of the higher slab in all cases. If 15% weightage is added to it, it works out to 57..5%.

    Suggestion: The existing Rule 54 and the table thereof may be substituted as follows:

    “Rule 54: The standard benefit rate for the purpose of calculation of the daily rate of all the cash benefits shall be 60 (sixty) percent of the average daily wages in the corresponding contribution period”.

    With this amendment, the calculation of all the benefits, become easier.
    Sickness benefit: 72% of the average daily wages (120% of the standard benefit rate).
    Disablement Benefit rate/full rate of DB: 90% of the average daily wages (150 of the standard benefit rate)
    Maternity benefit rate: 120% of the average daily wages (Double the standard benefit rate).

    If the above proposal for replacement of Rule 54 and table thereof, is approved, with a fixed percentage of the average daily wages in the Return of contribution in the corresponding contribution period, as the Standard Benefit Rate, the definition of ‘Average daily wages’ in Rule 2(1-A) need to be amended as follows.

    Rule 2(1-A):- “Average daily wages of an insured person during a contribution period for the purpose of ‘Standard benefit rate’ under Rule 54 for all ‘cash benefits’ shall be the aggregate amount of wages payable to him during that period, divided by the number of days (including the paid holidays and leave days) for which such wages were payable”

    There is no need to change the ‘average daily wages during a wage period’ prescribed under Rule 2(1-B).
    However, the ESIC has retained the standard benefit rate at average daily wages, and the sickness benefit rate restricted to 70 % thereof, while the committee recommended 72 % so that there may not be any reduction in the existing benefit. Similarly, th committee recommended maternity benefit at 120 percent of the average daily wages, but ESIC restricted it to only full average daily wages (100%). This resulted in reduction of both sickness and Maternity benefit at the rates prior to 30-6-2011. The Venkatesh Committee brought out these deficiencies to the ESIC for rectification.- K.V.Ramana Murty

    • We thank Mr. K.V. Ramana Murthy for his enlightening reply.
      The original Post was the outcome of the grievance of the beneficiaries represented through many Branch Office Managers of the ESIC very often as they were the people who were facing the beneficiaries.

      The core issue is that in view of Sec. 61, the benefits provided under the ESI Act should never be less than what is provided under the Maternity Benefit Act.

      Moreover, can there be a decision to reduce the benefits without making the people aware of it beforehand?

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