Government of India reduces rate of contribution under Employees’ State Insurance (ESI) Act from 6.5% to 4.0%

The Union Government has taken a historic decision to reduce the salary contribution of industrial workers who are eligible for healthcare benefits under the Employees’ State Insurance Act (ESI) Act from 6.5% to 4.0%. The move is aimed at formalizing India’s informal workforce and expanding social security coverage. The reduced rates will be effective from July 1 and would benefit 3.6 crore employees and 12.85 lakh employers. The reduced rate of contribution will bring about a substantial relief to workers under the ESI scheme and bring more and more workforce into the formal sector. The ESI Act of 1948 provides for medical, cash, maternity, disability and dependent benefits to the Insured Persons under the Act. The ESI Act is administered by the Employees’ State Insurance Corporation (ESIC). Benefits provided under the ESI Act are funded by the contributions made by the employers and the employees. The Government of India through the Ministry of Labour and Employment decides the rate of contribution under the ESI Act.