New ESI Contribution Rates: Eligibility, applicability and benefits for employees

 

The Employees’ State Insurance contribution rate which had remained unchanged since January 1, 1997, is being reduced from July 1, 2019.

Employees working in establishments and contributing to the Employees’ State Insurance (ESI) will now have something to cheer about. The ESI contribution rate, which had remained unchanged since January 1, 1997, is being reduced from July 1, 2019. ESI calculations show that this reduction will help the contributory employee take home a higher pay. The move will also help increase the ESI registration across the country.

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ESI CONTRIBUTION RATE

Under the Employees’ State Insurance Act 1948 (the ESI Act) the rate of contribution has been reduced from 6.5 per cent to 4 per cent of the wages. The employers’ contribution is being reduced from 4.75 per cent to 3.25 per cent and employees’ contribution being reduced from 1.75 per cent to 0.75 per cent effective from 01.07.2019.

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. Overall, the ESI contribution reduction would benefit about 3.6 crore employees and 12.85 lakh employers. The ESI card will reflect the changes in the coming months.

ESI APPLICABILITY

The ESI Act primarily applies to premises where 10 or more persons are employed and therefore applies to both organised and unorganised sectors. The ESI applicability is also to non-seasonal factories employing 10 or more persons and since 2011 it has been extended to shops, hotels, restaurants, private medical and educational institutions, cinemas and newspaper establishments employing 20 or more persons.

ESI BENEFITS

The ESI benefits include medical, cash, maternity, disability and dependent benefits to the Insured Persons under the ESI Act. The contributions made by the employee and the employer fund these ESI benefits.

The scheme provides full medical care to the employee registered under the ESI Act, 1948 during the period of his incapacity, restoration of his health and working capacity. It provides financial assistance to compensate for the loss of wages during the period of his abstention from work due to sickness, maternity and employment injury and during the hospitalization in any ESI hospital. The scheme provides medical care to the employee family members also.

Earlier in February 2019, the income limit for availing the medical benefit for the dependent parents of an Insured Person covered under ESI Scheme has been enhanced from the existing Rs.5000 per month from all sources to Rs.9000 per month.

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ESI ELIGIBILITY

Employees whose monthly wages are Rs 21,000 or below are covered under the ESI Act. The wage limit for coverage under the Act had been increased from Rs 15,000 per month to Rs 21,000 in December 2016. An employer is liable to pay its own contribution for every employee and deduct the employee’s contribution from wages bill and pay these contributions to the ESI within 15 days of the last day of the calendar month in which the contributions are due.