On June 13, the central government announced that the contribution of employees and employers towards the Employees’ State Insurance (ESI) scheme would be slashed from 6.5% to 4%. This is the first time in two decades that such a move has been initiated.

Contribution By Employees & Employers To Be Slashed

The Labour Ministry in a statement said that the employers’ contribution has been reduced from 4.75% to 3.25%. Additionally, the contribution of employees will be reduced from 1.75% to 0.75%. The ministry said, “The reduced rate of contribution will bring about a substantial relief to workers and will bring more and more workforce into the formal sector.”

The ministry also added that the reduction in the share of contribution of the employers will lead to improved viability of these organisations by reducing the financial liability.

Experts believe that the reduction in the contribution might be a result of the lower cost and better efficiency in the health insurance scheme. Additionally, the reduction will not reflect on the benefits defined in the scheme.

In December 2018, the healthcare units under the ESIC was opened to the general public. Apart from offering medicines at subsidized rates, the out-patient and in-patient facilities at a nominal cost are provided at these ESIC hospitals. A special programme was conducted to register employees and employers between December 2016 and June 2017. Plans are being made to extend the coverage of the ESI scheme to all districts across the country.

What is ESIC?

The Employees’ State Insurance Scheme is an integrated measure of Social Insurance embodied in the Employees’ State Insurance Act. It is introduced to protect the “employees” against the impact of sickness, maternity, disablement and death due employment injury and to provide medical care to insured persons and their families. Those coming under the ambit of ESIC are factories and other establishments viz. Road Transport, Hotels, Restaurants, Cinemas, Newspaper, Shops, and Educational/Medical Institutions wherein ten or more persons are employed. However, in some states, threshold limit for coverage of establishments is  20.

As of today, the Employees’ State Insurance (ESI) scheme is implemented at over 830 centres across 31 states and union territories, applying to 7.23 lakh factories and benefiting about 2.03 crore insured person/family units of workers.

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