Mr. K.V. Ramana Murthy, former D.D,on the Benefit Rates

(Mr. K. V. Ramana Murthy has given comprehensive reply to the Post titled ‘Enigmatic Amendment of 2011 that affects the Benefits’. His response is displayed here as a separate Post)

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.

AverageDaily wages  in RC.	Adding 15%	Daily wage slab number	StandardBenefitrate	Daily rate of SB	Daily rate of TDB/DB	Daily rate of MB	Percentage
							SB/TDB/MB
50	57.5	7	30	36	45	60	72/90/120
100	115	15	58	69.6	87	116	69.6/87/116
150	172.5	21	88	105.6	132	176	70.4/88/117.3
206	236.9	28	125	150	187.5	250	72.8/91/121.4
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.