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Employees’ State Insurance(ESI)
Why is it in the news?
- The Government of India has taken a decision to reduce the rate of contribution under the ESI Act from 6.5% to 4%.
- Reduced rates will be effective from 1st July 2019.
- This would benefit 3.6 crore employees and 12.85 lakh employers.
More in the news
- Employers’ contribution being reduced from 4.75% to 3.25% and employees’ contribution being reduced from 1.75% to 0.75%.
- Significance of the Reduction:(1) 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.(2) It will bring more and more workforce into the formal sector.(3) Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments.(4) This shall also lead to enhanced Ease of Doing Business.(5) 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):(1) It provides for medical, cash, maternity, disability and dependent benefits to the Insured Persons.(2) The ESI Act is administered by Employees’ State Insurance Corporation (ESIC).(3) Benefits provided under the ESI Act are funded by the contributions made by the employers and the employees.(4) Under the ESI Act, employers and employees both contribute their shares respectively.(5) The Government of India through Ministry of Labour and Employment decides the rate of contribution under the ESI Act.
Source
PIB