Viewing to drag more workforce into the formal sector, regency cuts ESI contribution rate from 6.5% to 4%

New Delhi, June 14: Viewing to bring more workforce into the formal sector and facilitate further enrollment of workers under the ESI scheme, the Centre has moved up to take a historic decision to reduce the rate ofcontribution under the ESI Act from 6.5% to 4%.

 

While employer’s contribution is reduced from 4.75% to 3.25%, employee’s contribution has been brought down to 0.75% from the extant 1.75%.

 

 

“Thiswould benefit 3.6 crore employees and 12.85 lakh employers and will bring about a substantial relief to workers, the Centre said adding that the revision of rates would be applicable from first day of July this year.

 

The reduction in the share of contribution of employers will also reduce the financial liability of the establishments leading to improved viability of these establishments. “This shall lead to enhanced Ease of Doing Business. It is also expected that reduction in rate of ESI contribution shall lead to improved compliance of law”, it added.

 

The Employee’s State Insurance Act 1948 provides benefits to the insured for medical, cash, maternity, disability and dependent benefits under the Act. The ESI Act is administered by Employee’s State Insurance Corporation. 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. 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%.