Government, ESIC to consider rise in employees take home salaries

The government will be holding a meeting of the Employees' State Insurance Corporation (ESIC) on Tuesday to approve amendments to the ESI Act of 1948, India's first social security legislation.

Among the issues likely to be discussed for possible amendment is a move to raise the take-home salaries of millions of workers by removing the clause of compulsory coverage in a state-run healthcare programme that costs government employees 6.5 per cent on a cost to company basis, and give them the choice to buy a health insurance product from an insurance firm instead.

If ratified, the change could throw up a major opportunity for India's two billion dollar health insurance business.

Finance Minister Arun Jaitley had in his budget speech declared the government's intent to allow employees to exercise their individual choice in health insurance.

The government is reportedly clear that safeguards will be in place to ensure that employers can't force workers to opt for either the ESI or a health insurance product as a pre-condition for employment.

About 60 per cent of India's organized sector workforce or 1.74 crore employees are covered by the ESIC, which offers medical care to them and their dependents along with unemployment benefits in case of disablement or occupational accidents, including fatal ones.

The law mandates employers to contribute 4.75 per cent of an employees' gross salary (up to Rs 15,000 per month) with a 1.75 percent matching premium payment from employees. In return, members get access to ESIC's 151 hospitals and 1,380 dispensaries around the country.

Trade unions are, however, annoyed with the haste with which the meeting has been scheduled. They claim that any amendments to the law are usually debated by the ESIC Board first.

This is the first time that the government is bringing amendments to the table.