For the first time in over two decades, the rate of contribution under the Employees’ State Insurance (ESI) Act has been reduced from 6.5 percent to 4 percent, the government said in a statement.
The move is expected to benefit 12.85 lakh employers who will see a 40 percent reduction in the rate of the contribution they make for their employees, in line with the provisions of the Employees’ State Insurance Act, 1948.
The reduced rates will come into effect from July 1.
The reduction in rates, the statement said, would “facilitate further enrolment of workers under the ESI scheme and bring more and more workforce into the formal sector.”
“Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability… This shall also lead to enhanced Ease of Doing Business. It is also expected that the reduction in the rate of ESI contribution shall lead to improved compliance of the law,” it said.
Those who are covered under the scheme, along with their families can avail “reasonable medical, surgical and obstetric treatment” in ESI dispensaries, hospitals, diagnostic centers, and recognized institutions.