Press Information Bureau
PRESS INFORMATION BUREAU
GOVERNMENT OF INDIA
****
Government Reduces the Rate of ESI Contribution from 6.5% to 4%
New Delhi, June 13, 2019
The Government of India has taken a historic decision to reduce the rate of contribution under the ESI 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 01.07.2019. This would benefit 3.6 crore employees and 12.85 lakh employers.
The reduced rate of contribution will bring about substantial relief to workers and will facilitate further enrollment of workers under the ESI scheme, bringing more workforce into the formal sector. Similarly, the 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 the reduction in the rate of ESI contribution shall lead to improved compliance with the law.
The Employees’ State Insurance Act 1948
The Employees’ State Insurance 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 the Employees’ State Insurance 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 India, through the Ministry of Labour and Employment, decides the rate of contribution under the ESI Act. Presently, the rate of contribution is fixed at 6.5% of the wages, with the employers’ share being 4.75% and the employees’ share being 1.75%. This rate has been in vogue since 01.01.1997.
Expanding Social Security Coverage
The Government of India, in its pursuit of expanding Social Security Coverage to more people, started a program 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. 15,000/- per month to Rs. 21,000/- from 01.01.2017.
These efforts resulted in a substantial increase in the number of registered employees, i.e., Insured Persons and employers, and also a quantum jump in the revenue income of the ESIC. The figures are as follows:
Year
No. of Employers
No. of Insured Persons (in crores)
Total contribution received (in Rs. crores)
2015-16
7,83,786
2.1
11,455
2016-17
8,98,138
3.1
13,662
2017-18
10,33,730
3.4
20,077
2018-19
12,85,392
3.6
22,279
The Government of India is committed to the welfare of employees as well as employers. It is also committed to improving the quality of medical services and other benefits being provided under the ESI scheme.
rcj/skp-ESI rate reduction13-04-2019
PRESS INFORMATION BUREAU
GOVERNMENT OF INDIA
****
Government Reduces the Rate of ESI Contribution from 6.5% to 4%
New Delhi, June 13, 2019
The Government of India has taken a historic decision to reduce the rate of contribution under the ESI 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 01.07.2019. This would benefit 3.6 crore employees and 12.85 lakh employers.
The reduced rate of contribution will bring about substantial relief to workers and will facilitate further enrollment of workers under the ESI scheme, bringing more workforce into the formal sector. Similarly, the 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 the reduction in the rate of ESI contribution shall lead to improved compliance with the law.
The Employees’ State Insurance Act 1948
The Employees’ State Insurance 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 the Employees’ State Insurance 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 India, through the Ministry of Labour and Employment, decides the rate of contribution under the ESI Act. Presently, the rate of contribution is fixed at 6.5% of the wages, with the employers’ share being 4.75% and the employees’ share being 1.75%. This rate has been in vogue since 01.01.1997.
Expanding Social Security Coverage
The Government of India, in its pursuit of expanding Social Security Coverage to more people, started a program 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. 15,000/- per month to Rs. 21,000/- from 01.01.2017.
These efforts resulted in a substantial increase in the number of registered employees, i.e., Insured Persons and employers, and also a quantum jump in the revenue income of the ESIC. The figures are as follows:
Year
No. of Employers
No. of Insured Persons (in crores)
Total contribution received (in Rs. crores)
2015-16
7,83,786
2.1
11,455
2016-17
8,98,138
3.1
13,662
2017-18
10,33,730
3.4
20,077
2018-19
12,85,392
3.6
22,279
The Government of India is committed to the welfare of employees as well as employers. It is also committed to improving the quality of medical services and other benefits being provided under the ESI scheme.
rcj/skp-ESI rate reduction13-04-2019