ESIC Lowers Contribution Rates

The Employee State Insurance Act, 1948, is a self- financing social security legislation that is aimed at ensuring protection to employees by providing medical, cash, sickness, disablement and maternity benefit. This scheme applies to all factories and establishments employing at least 10 employees who draw a salary below Rs. 21,000/-.  Registration under the scheme is compulsory for factories and establishments, if the above criteria are met. The employer and employee are required to contribute a fixed percentage of monthly wages of the employee as specified by the Government towards this scheme. 

Revision of ESI Rate

In a significant development, the Ministry of Labour and Employment has, recently revised the rate of ESI contribution to a reduced rate. The revised rates have been published in the Official Gazette of India, by notification number G.S.R. 423 (E), dated 13^thJune, 2019.

As per the revision, the total contribution now payable towards the ESI scheme is in the following manner:

The new rates specified by the notification shall come into effect from 01-07-2019 i.e. they shall be applicable to all factories and establishments that the Act governs. This revision is said to affect 3.6 crore employees and 12.85 lakh employers. This is a significant development in ESI rate revisions, as the rates/quantum of contribution in social security legislations, have always observed to have an upward graph.    

Reason for Lowered Rate

The underlying objective of this revision is to facilitate ease of doing business and ensure legal compliances and healthy growth of the businesses. These revised rates are a welcome change as are not only beneficial to the employees but are equally advantageous to the employers for easing their financial burden. The revised rates could encourage more employers and employees to register themselves under the scheme and ensure legal compliances by the employer.The ESI Act also provides compensation to employees in case of death, which includes funeral expenses, the insurance scheme provides benefits against occupational diseases contacted. By self-financing it is meant that both the employer as well as the employee contribute towards this scheme. All the benefits provided under this scheme are made available out of the contributions made by the employers and employees. It does not merely provide protection to an employee but also engulfs in its ambit their dependants.

Please contact Legawise for any assistance in understanding the Employee State Insurance Act.