ESIC Rule Change: How Will the New Contribution Rates Affect Employers and Employees?

ESIC Notification on Contribution Rates

ESIC, via notification no. G.S.R. 675(E), has omitted Rule 51B of The Employees' State Insurance (Central) Rules, 1950. This rule stated that in areas where the act is implemented for the first time, the contribution for the initial twenty-four months from the date of implementation for an employer was 3 percent and for an employee was 1 percent. The contribution rates will now be continued at 3.75 percent for the employer and 0.75 percent for the employee for all newly implemented areas.

Hello,

Thank you for your query. As per the ESIC notification no. G.S.R. 675(E), Rule 51B of The Employees' State Insurance (Central) Rules, 1950, which stated that in areas where the Act is implemented for the first time, the contribution for the initial twenty-four months from the date of implementation for an employer is 3 percent and employee is 1 percent, has been omitted.

This means that regardless of whether the Act is being implemented in an area for the first time or not, the contribution rates will be as follows:

➡️ For employers: The contribution rate is 3.75 percent.

➡️ For employees: The contribution rate is 0.75 percent.

So, in your case, being in Visakhapatnam, India, the new contribution rates apply to your area irrespective of whether it's the first-time implementation or not.

👉 Step 1: Calculate the gross salary of your employees.

👉 Step 2: Apply the contribution rates to the gross salary to determine the contribution amount. For employer contribution, multiply the gross salary by 3.75 percent. For employee contribution, multiply the gross salary by 0.75 percent.

👉 Step 3: Deduct the employee's contribution from their salary and add your employer's contribution.

👉 Step 4: Make sure to update your payroll systems to reflect these changes.

👉 Step 5: Inform your employees about the changes in the contribution rates. Transparency is critical in maintaining employee trust and engagement.

Remember, these changes are in accordance with the ESIC notification no. G.S.R. 675(E) and are applicable to all areas. It's essential to comply to avoid any legal complications down the line.

I hope this information helps. If you have any more questions, feel free to ask.

🔔 Please note: This advice is based on the current notification and may be subject to changes as per any future notifications from ESIC or the relevant authorities.