Government reduces ESI contribution rate to 4 per cent

The government has reduced the rate of the contribution made by employees and employers under the Employees' State Insurance (ESI) Act from 6.5 per cent to 4 per cent. In a release, the Ministry of Labour and Employment said, the government has taken a historic decision to reduce the rate of contribution under the ESI act. The new rate will be effective from the 1st of next month. It will benefit 3.6 crore employees and 12.85 lakh, employers.

 

The ministry said, 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. 

It said, similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments. It will also lead to enhanced Ease of Doing Business, the statement added. 

The ESI Act provides for medical, cash, maternity, disability and dependent benefits to the Insured Persons under the Act. Benefits provided under the ESI Act are funded by the contributions made by the employers and the employees.