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FISME welcomes govt’s decision to reduce ESI contribution rate to 4 per cent

Updated: Jun 14, 2019 06:38:24am
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FISME welcomes govt’s decision to reduce ESI contribution rate to 4 per cent

New Delhi, June 14 (KNN) The government has reduced the contribution under the Employees’ State Insurance (ESI) Act from 6.5% to 4%, a move that will benefit 36 million workers and 1.28 million employers. The reduced rates will be effective from July 1, 2019.

This includes a reduction of 1.5% in employers’ contribution to 3.25% from 4.75% and 1% reduction in employees’ contribution to 0.75% from 1.75%, the labour ministry said in a statement.

Welcoming the historic decision of the Government, President of Federation of Indian Micro and Small & Medium Enterprises (FISME), Animesh Saxena said “The move will reduce the cost burden for employees and employers. It will encourage the small entrepreneurs to be more compliant.”

Sometimes workers are reluctant to enroll because of the cost, they will also be encouraged. So, overall it’s a good step by government for the reduction of the cost ensuring more compliance.

Besides this, FISME requested the government to increase the ESI facilities as there is already a burden on the existing infrastructure.

Saxena said “Government should expand the infrastructure, more hospitals and dispensaries.”

While appreciating the move, Chairman of Labour Laws Committee, Mohali Industries Association (MIA), Jasbir Singh the move take by the Government is appreciable but on the other hand, the facilities provided under the scheme should be improved and extended.

He said that the only concern of the workers is that they should receive good services and facilities under the scheme.

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, said Ministry.

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 added.

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.

Presently, the rate of contribution is fixed at 6.5% of the wages with employers’ share being 4.75% and employees’ share being 1.75%. This rate is in vogue since January 1, 1997.

It said, “The Government of India is committed to the cause of welfare of employees as well as employers. It is also committed to improve the quality of medical services & other benefits being provided under the ESI scheme.”

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