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Government reduces rate of ESI contribution from 6.5% to 4%

Capital Market 

Benefit to 3.6 crore employees and 12.85 lakh employers

The Government of has taken a historic decision to reduce the rate of contribution under the Act from 6.5% to 4% (employers' contribution being reduced from 4.75% to 3.25% and employees' contribution being reduced from 1.75% to 0.75%). Reduced rates will be effective from 01 July 2019. This would benefit 3.6 crore employees and 12.85 lakh employers.

The reduced rate of contribution will bring about a substantial relief to workers and it will facilitate further enrollment of workers under the scheme and bring more and more workforce into the formal sector. Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments. This shall also lead to enhanced Ease of Doing Business. It is also expected that reduction in rate of contribution shall lead to improved compliance of law.

The Act 1948 (the ESI Act) provides for medical, cash, maternity, disability and dependent benefits to the Insured Persons under the Act. The ESI Act is administered by Corporation (ESIC). Benefits provided under the ESI Act are funded by the contributions made by the employers and the employees.

Under the ESI Act, employers and employees both contribute their shares respectively. The Government of through decides the rate of contribution under the ESI Act. Presently, the rate of contribution is fixed at 6.5% of the wages with employers' share being 4.75% and employees' share being 1.75%. This rate is in vogue since01 January 1997.

The Government of in its pursuit of expanding the Social Security Coverage to more and more people started a programme of special registration of employers and employees from December, 2016 to June, 2017 and also decided to extend the coverage of the scheme to all the districts in the country in a phased manner. The wage ceiling of coverage was also enhanced from Rs 15000/- per month to Rs 21000/- from 01 January 2017.

The is committed to the cause of welfare of employees as well as employers.

It is also committed to improve the quality of medical services & other benefits being provided under the ESI scheme.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, June 14 2019. 13:03 IST
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