Government Moderates the Rate of ESI Contribution from 6.5% to 4%

The rate of contribution under the ESI Act has been cut off to 4% from 6.5% by The Government of India (employers’ contribution being reduced to 3.25% from 4.75% whereas the employees’ contribution is being reduced to 0.75% from 1.75%). These rates will be active from 01.07.2019. These changes will benefit 3.6 crore employees and 12.85 lakh employers. The reduced rate of contribution will bring about a considerable relief to workers and it will benefit later enrolment of the workers under the ESI scheme bringing a huge amount of workforce into the formal sector. None the less, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments. This change brought about could also call out for enhanced ease of doing business. After this expectation lies with the reduction of the ESI contribution shall lead to improved observance of law.

The Employees State Insurance Act (the ESI Act), 1948 yields for medical, cash, maternity, disability and dependent benefits to the Insured Persons under this Act. The ESI Act is operated by Employees’ State Insurance Corporation (ESIC). Facilities provided under the ESI Act are funded by the contributions made by the employers and the employees. The ESI Act regulations include the contribution of shares from both the employers’ and the employees. The government of India through Ministry of Labour and Employment decided the rate of contribution under the ESI Act. Currently, the rate of contribution is fixed at 6.5% of the wages with employers’ share being 4.75% and employees’ share 1.75%. This rate is invoked since 01.01.1997.

The Government of India looks in the direction of the gradual growth of the Social Security Coverage; many involved themselves with this reform and initiated a program of special registration for the employers and the employees from December 2016 to June 2017; further proceeding to broaden the coverage of the scheme, which will then be incorporated in stages to all the districts of India. The maximum amount of wage coverage on 01.01.2017 was pulled up to Rs. 21,000 per month from which brushed in the gradually push in the employment industry. These efforts resulted in a gradual increase in the number of registered employees i.e. Insured Persons and employers and also a quantum jump in there venue income of the ESIC.

The figures that formulated since the fiscal year 2015-16 concerning the number of employers were 7,83,786 while the number of Insured Persons resulted in 2.1 crores with a total contribution of Rs.11,455 crore was received the following fiscal year (2016-17) resulted in a total contribution of  Rs.13,662 crore hiking the number of employers to 8,98,138 with 3.1 crore employees  involved in the process. The follow up in the next fiscal year elevated with a smooth flow while in the year 2017-18 the number of employers and employees involved were 10,33,730 and 3.4 crores respectively with an outcome of Rs. 20,077 crore as the total contribution, lastly in the final countdown, the fiscal year 2018-19 showed the elevation in the sector involving 12,85,395 employers along with 3.6 crore employees producing a contribution of Rs. 22,279 crore, evidently showing the success of the rate cut-offs.  

The Government of India is dedicated to the cause of the welfare of employees as well as employers. The Government has also taken it upon itself to improve the quality of medical services and other benefits being provided under the ESI scheme.

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By LNN (Liyaans News Network)