Quantum of cash benefits: Existing ESI Act Vs. Proposed Code on Social Security 2020 !

At present, an employee who is covered under the existing ESI Act and earns a sum of Rs. 20000 pm as wages, gets about Rs. 14000 pm as Sickness Benefit, Rs. 16000 as Extended Sickness Benefit and Rs. 18000 as Total Disablement Benefit and about Rs. 20000 as Maternity Benefit, if the period of abstention is assumed to be one month. Because, the quantum of benefit is decided on the basis of total wages the employee receives, as per Sec. 2 (22) of the ESI Act.

But if and when the Social Security Code, 2020 is implemented, the benefit rate would be quantified only on the basis of the ‘minimum wages’ prescribed by the respective State Governments, as per  Sec. 2 (88) of the impugned Code read with Sec.2 (y) of the Code on Wages, 2019, and, consequently, the same employee would roughly get only about Rs. 7000 pm as Sickness Benefit (instead of Rs.14000), about Rs. 8000 as Extended Sickness Benefit (instead of Rs. 16000), about Rs. 9000 as Total Disablement Benefit (instead of Rs. 18000) and about Rs. 9000 or 10000 as Maternity Benefit (instead of Rs. 20000).

The livelihood of the employee is, thus, directly affected because the impugned Code has restricted the social security benefits by linking it only to the Minimum Wages instead of linking it to the maximum of the wages earned, i.e., the maximum of the Living Wage mentioned in Art. 43 of the Constitution of India or, the maximum of at least, Fair Wages, as provided at present under the ESI Act.

The following table would illustrate the position even more clearly:


  1. The quantum of benefits is required to be calculated on the basis of the “standard benefit rate” with reference to “average daily wages” defined in Rule. 2 (f), (g) & (zf) of the Code on Social Security Rules, 2020.
  2. Minimum Wages for this illustration is assumed to be Rs. 380 per day for an unskilled worker in a State. 380 multiplied by 26 arrives at the monthly income of Rs. 9880. So, a sum of Rs.10000 is assumed to be the minimum wages that would be taken into account by the employer and the ESI Corporation for providing all kinds of cash benefits to an employee who is actually earning, now, Rs 20000 in a factory covered under the ESI Act, 1948.

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