Reduces the Rate of ESI Contribution from 6.5% to 4%

Posted on July 11, 2019 by SRRF

The Government of India has taken a historic decision to reduce the rate of contribution under the ESI ‎Act from 6.5% (4.75% +1.75%) to 4% (3.25%+0.75%). Employers’ contribution being reduced from ‎‎4.75% to 3.25% and employees’ contribution being reduced from 1.75% to 0.75%. Reduced rates will be ‎effective from 01.07.2019. This would benefit 3.6 crore employees and 12.85 lakh employers.‎

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 Employees’ State Insurance Act 1948 (the ESI Act) provides for medical, cash, maternity, disability ‎and dependent benefits to the Insured Persons under the Act. 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.‎

Under the ESI Act, employers and employees both contribute their shares respectively. The ‎Government of India through Ministry of Labour and Employment decides the rate of contribution ‎under the ESI Act. ‎

The Government of India in its pursuit of expanding the Social Security Coverage to more and more ‎people started a programme of special registration of employers and employees from December, 2016 ‎to June, 2017 and also decided to extend the coverage of the scheme to all the districts in the country in ‎a phased manner. The wage ceiling of coverage was also enhanced from Rs. 15,000/- per month to Rs. ‎‎21,000/- from 01.01.2017.‎
‎___ ‎
Socio Research & Reform Foundation (NGO)
‎512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008‎

This entry was posted in FCRA, TAX, LEGAL. Bookmark the permalink.

2 Responses to Reduces the Rate of ESI Contribution from 6.5% to 4%

  1. Thomas Mathews says:
    July 15, 2019 at 9:10 am

    There is also a change in PF deduction for employees whose base salary is less than Rs 15,000. All allowances other than HRA are added to base salary and 12% of the amount need to be deposited with EPFO. Can someone advice on the same. Whether a cap of Rs 15,000 base salary or actual base plus other allowances need to be calculated for PF.

  2. MANISH K SRIVASTAVA says:
    July 11, 2019 at 9:37 am

    SIr

    IS this applicable for Trust also.

    Thanks
    Manish
    BT

Comments are closed.