Centre reduces contribution rate for ESI

Starting July 1, both employer’s and employee’s contribution under the Employees’ State Insurance (ESI) Act, which gives insured workers medical benefits among other facilities, would be reduced, the Centre said on Thursday.

The total contribution towards ESI was reduced from 6.5% of an employee’s wages to 4%, with the employer’s share cut to 3.25%, from 4.75%, and the employee’s contribution lowered to 0.75% of wages, from 1.75%, the government announced.

“This would benefit 3.6 crore employees and 12.85 lakh employers,” the Labour and Employment Ministry said in a statement. “The reduced rate of contribution will bring about a substantial relief to workers under the ESI scheme and bring more and more workforce into the formal sector,” it added.

The financial liability on employers would also be reduced, leading to improved viability of the establishments, increased ease of doing business and likely improved compliance with the Act, the government said, adding that the current rates had been in place since January 1, 1997.

However, a member of the Employees’ State Insurance Corporation’s Standing Committee and a representative of the RSS-affiliated Bharatiya Mazdoor Sangh, V. Radhakrishnan, said the reduction in contribution rates was a reason for concern.

“BMS has a strong protest against this,” said Mr. Radhakrishnan. “The ESIC is an autonomous body and these rates have not been discussed. If the government proposes even lower rates in the next Board meeting of the ESIC, we will oppose it. We want to increase the benefits given to employees, not reduce the contribution so much,” he added.

An official of the Labour and Employment Ministry, however, dismissed the criticism as mere “apprehensions”.