{"id":215716,"date":"2019-06-14T12:59:44","date_gmt":"2019-06-14T07:29:44","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=215716"},"modified":"2019-06-15T12:29:00","modified_gmt":"2019-06-15T06:59:00","slug":"historic-decision-by-government-of-india-esi-contribution-rates-reduced-from-6-5-to-4","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2019\/06\/14\/historic-decision-by-government-of-india-esi-contribution-rates-reduced-from-6-5-to-4\/","title":{"rendered":"[Breaking] Historic Decision | ESI Contribution rates reduced from 6.5% to 4%"},"content":{"rendered":"<p style=\"text-align: justify;\">The Government of India has taken a <strong>historic decision<\/strong> to reduce the rate of contribution under the ESI Act from 6.5% to 4%(employers\u2019 contribution being reduced from 4.75% to 3.25% and employees\u2019 contribution being reduced from 1.75% to 0.75%. Reduced rates will be effective from 01-07-2019 \u00a0This would benefit 3.6 crore employees and 12.85 lakh, employees.<\/p>\n<p style=\"text-align: justify;\">The reduced rate of contribution will bring about a substantial\u00a0<strong>relief to workers and it will facilitate further enrollment of workers\u00a0<\/strong>under the ESI scheme and\u00a0<strong>bring more and more workforce into the formal sector<\/strong>. Similarly, reduction in the share of contribution of employers will\u00a0<strong>reduce the financial liability of the establishments leading to improved viability\u00a0<\/strong>of these establishments. This shall also lead to\u00a0<strong>enhanced Ease of Doing Business<\/strong>. It is also expected that the reduction in the rate of ESI contribution shall lead to <strong>improved compliance of law.<\/strong><\/p>\n<p style=\"text-align: justify;\">About the Employees\u2019 State Insurance Act,1948 :<\/p>\n<p style=\"text-align: justify;\">The Employees\u2019 State Insurance Act, 1948 (the ESI Act) provides for <strong>medical, cash, maternity, disability and dependent benefits\u00a0<\/strong>to the Insured Persons under the Act. The ESI Act is administered by Employees\u2019 State Insurance Corporation (ESIC). Benefits provided under the ESI Act are funded by the contributions made by the employers and the employees.<\/p>\n<p style=\"text-align: justify;\">Under the ESI Act,\u00a0<strong>employers and employees both contribute\u00a0<\/strong>their shares respectively. The Government of India through the Ministry of Labour and Employment decides the rate of contribution under the ESI Act. Presently, the rate of contribution is fixed at <strong>6.5% of the wages with employers\u2019 share being 4.75% and employees\u2019 share being 1.75%<\/strong>. This rate is in vogue\u00a0<strong>since 01-01-1997<\/strong>.<\/p>\n<p>In exercise of the powers conferred by Section 95 of the said Employees\u2019 State Insurance Act, 1948, the Central Government, after consultation with the Employees\u2019 State Insurance Corporation, hereby makes the following rules further to amend the Employees\u2019 State Insurance (Central) Rules, 1950, namely:-<\/p>\n<p>1. (1) These rules may be called the <strong>Employee\u2019s State Insurance (Central) Amendment Rules, 2019<\/strong>;<\/p>\n<p>(2) They shall come into force on the 1st day of July, 2019.<\/p>\n<p>2. In the Employees\u2019 State Insurance (Central) Rules, 1950, in Rule 51, \u2013<\/p>\n<p>(a) in clause (a), for the words \u201cequal to four and three-fourth per cent of the wages\u201d, the words \u201cequal to three and one-fourth per cent. of the wages\u201d shall be substituted;<\/p>\n<p>(b) in clause (b), for the words \u201cequal to one and three-fourth per cent of the wages\u201d, the words \u201cequal to three-fourth per cent. of the wages\u201d shall be substituted.<\/p>\n<hr \/>\n<p><strong>[<a href=\"http:\/\/pib.nic.in\/PressReleseDetail.aspx?PRID=1574520\">Press Release dt. 13-06-2019<\/a>]<\/strong><\/p>\n<p><strong>[Source: PIB]<\/strong><\/p>\n<p style=\"text-align: right;\"><strong>Ministry of Labour &amp; Employment<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Government of India has taken a historic decision to reduce the rate of contribution under the ESI Act from 6.5% to 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