Monday, 30th October 2017

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Cut in ESI contribution

The employer’s contribution has been reduced from 4.75% of the employee’s gross salary to 3.25%

  • Published 14.06.19, 6:53 AM
  • Updated 14.06.19, 6:53 AM
  • a min read
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A media statement from the Union labour ministry said the decision would benefit 3.6 crore people and 12.85 lakh employers. While the reduction will increase the employee’s take-home salary, it will not reduce the benefits under the ESI scheme. (Representative image: Shutterstock)

Employers and employees will from July this year contribute less to the Employees’ State Insurance Corporation towards the social security of workers.

The Centre has reduced the employer’s contribution from 4.75 per cent of the employee’s gross salary to 3.25 per cent, and the employee’s contribution from 1.75 per cent to 0.75 per cent. The combined contribution per employee will therefore drop from 6.5 per cent to 4 per cent.

A media statement from the Union labour ministry said the decision would benefit 3.6 crore people and 12.85 lakh employers. While the reduction will increase the employee’s take-home salary, it will not reduce the benefits under the ESI scheme.

The ESI Act, 1948, provides for free medical treatment of the employees and their depndents among other benefits such as maternity benefit for women employees and a disablement benefit or family pension in case of employment-related disablement or death.

The scheme covers employers in the organised sector who do not provide any separate health insurance, and those of their employees whose gross salary is lower than a prescribed ceiling.

In January 2017, the government had raised this ceiling from Rs 15,000 a month to Rs 21,000, bolstering the number of insured people from 2.1 crore in 2015-16 to 3.6 crore in 2018-19.