In the first such move since 1997, the rate of contribution under the Employees’ State Insurance (ESI) Act has been reduced from 6.5 per cent to 4 per cent, the government said in a statement issued Thursday.
While the employer’s contribution has been reduced from 4.75 per cent to 3.25 per cent, that of the employee is down from 1.75 per cent to 0.75 per cent. The reduced rates, which will come into effect from July 1, is expected to benefit 3.6 crore employees and 12.85 lakh employers.
The reduction in rates, the statement said, would “facilitate further enrolment 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… 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,” it said.
Those covered under the scheme, along with their families, can avail “reasonable medical, surgical and obstetric treatment”
in ESI dispensaries, hospitals, diagnostic centres and recognised institutions.
They are also entitled to sickness benefit at the rate of 70 per cent of wages for maximum of 91 days in a year. For maternity benefit, the full wages are paid for 26 weeks, and for another one month depending on the doctor’s advice. The permanent disability benefit is 90 per cent of wages in support for families of workers who die on the job.
The ESI Act 1948 was the first major legislation on social security for workers in independent India. It provides for health-related events, such as sickness, maternity and temporary or permanent disability. It also covers occupational disease or death due to employment injury, resulting in loss of wages or earning capacity — either total or partial.
Under the Act, employers and employees contribute their share, respectively, with the rate of contribution being decided through the Ministry of Labour and Employment. Currently, all employees who earn upto Rs 21,000 per month are eligible for ESI benefits — the ceiling was raised in 2017.
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