July 3, 2019

Government of India reduces ESIC contribution from 6.5% to 4%

The Government of India has reduced the rate of ESIC contribution under the Employees’ State Insurance Act (‘ESI Act’) from 6.5 percent of the total wages to 4% of the total wages.

The reduced rates are effective 1 July 2019. The Ministry of Labour and Employment of the Government of India has issued a gazette notification int his regard.

The ESI Act is one of the social security laws in India which provides for medical, cash, maternity, disability and dependent benefits to the eligible employees covered under the ESI Act. All employees with a gross pay of less than INR 21,000 per month would be eligible to be covered under this scheme.

The ESI Act is administered by Employees’ State Insurance Corporation (‘ESIC’) and various benefits to the employees are funded by way of contributions from both Employees as well as the Employer. The current contribution which has been in existence from January 1997 is 6.50%, out of which the Employee contributes 1.75% and the balance 4.75% is the employers’ share.

As per the reduced rates a total of 4% is now required to be deducted in place of 6.50%. The employees’ share of contribution has been reduced from 1.75% to 0.75%, while the Employer is required to contribute 3.25%, a reduction of 1.50% from 4.75%.

As per the press release of the Ministry for Labour and Employment, the reduction in rate of ESI is estimated to benefit 3.6 crore employees and 12.85 lakh employers.

Benefits of reduction in ESIC rate

Reduced financial liability on employers and facilitating ease of doing business in India
Increase in the take-home salary of employees
Encourage employers to bring in more informal workforce into the formal sector

Read about All Allowances paid as part of salary are subjected to PF contribution

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

UAN – Universal Account Number

Various relief by EPF and ESIC during COVID 19

PF and ESI Payment, Due Date | Late Fees & Interests

All Allowances paid as part of salary are subjected to PF contribution

Providend Fund

Frequently Asked Questions-FAQs on EPF and ESIC

As per EPF Act, every establishment employing 20 or more employees are liable to get themself registered under EPF Scheme. However, establishments with less than 20 employees may get registered voluntarily.

08/09/2020 No Comments

Providend Fund

UAN – Universal Account Number

The UAN of an employee remains the same throughout life irrespective of the number of jobs he/she changes. Every time an employee switches his/her job, EPFO allots a new member identification number (ID), which is linked to the UAN.

08/09/2020 No Comments

Various relief by EPF and ESIC during COVID 19

Providend Fund

Various relief by EPF and ESIC during COVID 19

To provide some relaxations to establishments without affecting earnings of workers, the government has come with various reliefs by EPF and ESIC during covid 19 in compliances requirement with respect to ESIC and EPF.

26/05/2020 No Comments

Let us help you

Want to talk to us
Leave your Name, email, Phone number along with what you are looking for in message box or you can call us at 011-41715118

We serve on FDI advisory, cross-border accounting, International tax planning and Management consulting needs of our overseas clients all over the world.

Contact us

Corporate Office: 601, 6th Floor, GMIT Park, Sector 142, Noida Exp Way, Noida – 201305

Registered Office: 44, Backary Portion, 2nd Floor, Regal Building, New Delhi 110001

Landline: 0120-4415477-78
info@vjmglobal.com
+91 9891576441, 9213397070, 9911887030

Our Services

Working Time

Mon – Fri: 09:00am – 06:00pm

Closed on Weekends

For You

Quick Links

Ask Us

Industries We Serve

V J M & Associates LLP

Contact Us

All about new Labour codes

The Labour Ministry has envisaged implementing the four labour codes from 1st April 2021 this year in one go. But the four labour codes which were earlier set to be notified on April 1, got delayed due to the delay of the states in finalizing the rules which forced the government to delay the implementation of the codes.

The Labour Ministry is believed to be ready with the new rules and will notify them once states finalize the rules to be implemented in their domain.