1 Jul 2019

ESIC Rates Revised

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ESIC Rates Revised

What is ESIC?

Employees’ State Insurance Corporation (“ESIC”) is a statutory corporate body. And is set up under the ESI Act 1948. Its responsible for the administration of the ESI Scheme. So the ESIC rates are revised to 4.00%. In this article we talk about the ESIC rates revised in detail.
 
The ESI scheme is indeed a comprehensive social security scheme. Above all It protects the employees covered under the scheme against financial distress. Distress arising as a result of events of sickness, disablement or death due to employment injuries.

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ESIC Contributions

The ESI Act in particular provides benefits to the insured persons through contributions. Furthermore, these contributions come from employees and employers. Benefits in brief include medical, cash, maternity, disability and dependent benefits. As mentioned earlier, the Employees’ State Insurance Corporation, under labour ministry, administers the scheme.

ESIC Rates Revised to 4%

The Government certainly reduced the ESI contribution rates to 4%. Earlier contribution rates were 6.5%. These are explained under the Employees State Insurance (ESI) act in detail. The resulting decrease in the rates in significant. We therefore expect this move to increase the take home salary of workers. As well as reduce the financial burden of employers. The decision in particular is expected to benefit millions of workers and employers.

ESIC Applicability

 The ESI scheme is applicable to most factories in the country. Its applicable for establishments as defined in the Act with 10 or more persons employed. As well as in such establishment and the beneficiaries’ monthly wage does not exceed Rs 21,000. Note that threshold for coverage of establishments is 20 employees in Maharasthra & Chandigarh. The ESI Act 1948 under the labour ministry covers employees with salary up to Rs 21,000. It has of course always been the aim of the Government to increase the country’s formal workforce. With this in mind, the government had raised the wage ceiling in December 2016 to Rs 21,000 from Rs 15,000.
 
The scheme also covers restaurants, hotels, movies and purview theatres. As well as motor road transports, newspaper establishments and undertakings and shops.

Reduction in Rates

This includes a reduction of 1.5% in employers’ contribution. From the earlier 4.75 to 3.25% now. And 1% reduction in employees’ contribution. From the earlier 1.75% to 0.75%. So, over all the ESIC rates revised to 4.00%
 
View the Comparision Chart:
 
ESIC contribution rates
Particulars Old Rate New Reduced Rate
Employer Share 4.75% 3.25%
Employee Share 1.75% 0.75%
Total 6.50% 4.00%
 
The reduced rate of contribution might indeed bring about a substantial relief to workers. Likewise, a reduction in contribution might reduce their financial liability to the employers. At any rate, this should lead to improved viability of these businesses. And also lead to enhanced ease of doing business.

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