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Modi Govt Reduces ESI Contribution Rate From 6.5 To 4 Per Cent; To Benefit 12.65 Lakh Employers, 3.6 Crore Employees
View of a textile factory. (Photo by Pradeep Gaur/Mint via Getty Images)
In a big move towards increasing the formalisation of the Indian Economy, the Narendra Modi led central government has reduced the salary contribution rate for the Employees’ State Insurance (ESI) from 6.5 per cent to 4 per cent, MInt has reported.
Under the new norms, employee contribution has been slashed from 1.75 per cent to 0.75 per cent and the employer contribution has been slashed from 4.75 per cent to 3.25 per cent.
These reduced rates will come into effect from 1 July and are expected to benefit 3.6 crore insured employees and 12.85 lakh employers. This reduced contribution would encourage more workers and employers to get enrolled in this scheme. It will also increase the in-hand salary of the employees.
Currently, workers earning less than Rs 21,000 per month while working in a company with more than 10 employees are eligible for ESI. This decision is also expected to save Rs 5,000 crore annually.
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