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The total contribution towards ESI was reduced from 6.5% of an employee’s wages to 4%, with the employer’s share cut to 3.25%, from 4.75%, and the employee’s contribution lowered to 0.75% of wages, from 1.75%, the government announced. More in News
  • The move would benefit 85 lakh employers and over 3.6 crore employees.
    • Reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments
    • The employee gets a higher take home salary.
  • The government assured that the lower rate of contribution does not affect the benefits defined in the scheme
  • The move is aimed at formalising India’s informal workforce and expanding social security coverage.
    • The reduced rate of contribution will bring about a substantial relief to workers and facilitate further enrolment of workers under the Employees' State Insurance (ESIC) scheme and bring more and more workforce into the formal sector.
ESI Scheme
  • The ESI Act, 1948, applies to organisations with 10 or more employees, drawing a salary of up to ₹21,000.
    • The wage ceiling for availing benefits under the programme was also increased from ₹15,000 per month to ₹21,000 from 1 January 2017.
  • The scheme, which is governed by the state-administered Employees’ State Insurance Corporation (ESIC), provides for medical, cash, maternity, disability, and dependent benefits to the insured.
  • The government, in its pursuit to expand social security coverage to more people, had carried out a special programme to register employers and employees between December 2016 and June 2017.
  • It had also decided to extend the coverage of the ESI scheme to all the districts across the country in a phased manner.
  • The efforts resulted in an increase in the number of registered employees and employers and led to a substantial jump in the revenue income of the ESIC.
    • The number of people insured under the scheme increased to 3.6 crores in 2018-2019, from 2.1 crores in 2015-2016
    • The total contribution received climbing to ₹22,279 crore, from ₹11,455 crore, government data show.
    • The number of employers in the scheme increased from 7.83 lakh in 2015-2016 to 8.98 lakh in 2016-2017, then to 10.33 lakh in 2017-2018 and to 12.85 lakh in 2018-2019.
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