Govt reduces rate of contribution towards ESI scheme, employers to benefit

Government decision may lead to annual savings to the tune of Rs 9,000 crore for the industry.

The legislature on Thursday declared lessening the complete rate of commitment made by laborers and businesses towards the Employees’ State Insurance (ESI) plot from 6.5 percent to 4 percent without precedent for more than two decades.

The move is relied upon to profit around 1.3 million businesses who will see a 40 percent decrease in the rate of commitment they make for their representatives, in accordance with the arrangements of the Employees’ State Insurance Act, 1948.

About 4.75 percent of a laborer’s month to month compensation goes towards ESI as the business’ commitment, 1.75 percent of the salary is the representative’s offer at present. Presently, 3.25 percent will be the business’ offer and 0.75 percent the employee’s. This will be viable from July 1, 2019 — a move the legislature said “would profit 36 million workers and 1.28 million managers”.

The move has the endorsement of Labor and Employment Minister Santosh Kumar Gangwar who had given his gesture before he traveled to Switzerland on Tuesday to go to the International Labor Conference. The Employees State Insurance Corporation (ESIC), which oversees the ESI Act, had in February prescribed diminishing the absolute rate of commitment of laborers towards the protection conspire from 6.5 percent to 5 percent. Be that as it may, the work and business service proceeded to diminish the commitment rate to 4 percent.

“The reduced rate of contribution will bring about a substantial relief to workers and it will facilitate further enrolment of workers under the ESI scheme and bring more and more workforce into the formal sector,” the government said in a statement, adding “Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments.”