Question

The contribution payable under the ESI Act in respect of an employee shall comprise of

• A. contribution payable by the employer only
• B. contribution payable by the employee only
• C. contribution payable by government only
• D. contribution payable by employer and employee

Hint:

Remember that major social security schemes like ESI and Provident Fund (PF) are based on a contributory principle. The financial responsibility is shared between the employer and the employee to create a sustainable social security net.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
The Employees' State Insurance (ESI) Act, 1948, establishes a comprehensive social security scheme. This scheme is financed through a fund. The question asks about the source of the contributions that make up this fund.
Step 2: Detailed Explanation:
The ESI scheme is a contributory one, meaning it is funded by regular contributions from the stakeholders. \begin{itemize} \item Section 39 of the ESI Act specifies that the contribution payable under the Act shall comprise of contribution payable by the employer (employer's contribution) and contribution payable by the employee (employee's contribution). \item The rates of contribution are fixed by the Central Government as a certain percentage of the wages paid to the employee. \item The employer is primarily responsible for paying both their own contribution and the employee's contribution, but they are entitled to recover the employee's share from their wages. \item State Governments also contribute a share of the cost of medical benefits. However, the primary "contribution in respect of an employee" comes from the employer and the employee themselves. \end{itemize} Therefore, the fund is built upon a dual contribution system involving both the employer and the employee.
Step 3: Final Answer:
The contribution shall comprise of contribution payable by employer and employee.