New Delhi, June 13: The Union Government on Thursday reduced the contribution of the ESI Act from 6.5 per cent to 4 per cent. While the employers' contribution has been reduced from 4.75 per cent to 3.25 per cent, the employees' contribution has been reduced from 1.75 per cent to 0.75 per cent.
Presently, the rate of contribution is fixed at 6.5 per cent of the wages with employers' share being 4.75 per cent and employees' share being 1.75 per cent. The new rates would come into effect from July 1, 2019.
"The reduced rate of contribution will bring about a substantial relief to workers and it will facilitate further enrollment of workers under the ESI scheme and bring more and more workforce into the formal sector. Similarly, 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 reduction in rate of ESI contribution shall lead to improved compliance of law," the government press release said.
The Employees' State Insurance Corporation is a pioneer Social Security organization providing comprehensive social security benefits like reasonable Medical Care and a range of Cash Benefits in times of need such as employment injury, sickness, death etc.
The ESI Act is administered by Employees' State Insurance Corporation (ESIC). Benefits provided under the ESI Act are funded by the contributions made by the employers and the employees.
Here are more details about ESI rates: