Centre reduces ESI contribution rate from 6.5 to 4%


The Centre on Thursday reduced the rate of contribution under the ESI Act FROM 6.5 per cent to 4 per cent, with employers’ contribution being reduced from 4.75 to 3.25 per cent and employees’ contribution from 1.75 to 0.75 per cent. The Government of India through the Ministry of Labour and Employment decides the rate of contribution under the ESI Act.

Reduced rates will be effective from July 1, an official statement said, adding that the reduction would benefit 3.6 crore employees and 12.85 lakh employers.

Presently, the rate of contribution is fixed at 6.5 per cent of the wages with employers’ share being 4.75 per cent and the employees’ share being 1.75 per cent. The rate is in effect since January 1, 1997.

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. 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, the statement said. (ANI)