Centre reduces ESI contribution rate from 6.5% to 4%


New Delhi: The Central Government has reduced the rate of contribution under the ESI Act from 6.5% to 4%. Reduced rates will be effective from July 1. This would benefit 3.6 crore employees and 12.85 lakh employers.

Employers’ contribution was reduced from 4.75% to 3.25% and employees’ contribution was reduced from 1.75% to 0.75%, respectively.

Under the ESI Act, employers and employees both contribute their shares respectively. The Central Government through Ministry of Labour and Employment decides the rate of contribution under the ESI Act. Presently, the rate of contribution is fixed at 6.5% of the wages with employers’ share being 4.75% and employees’ share being 1.75%. This rate is in vogue since01.01.1997.

The Union Government in its pursuit of expanding the Social Security Coverage to more and more people started a programme of special registration of employers and employees from December, 2016 to June, 2017 and also decided to extend the coverage of the scheme to all the districts in the country in a phased manner. The wage ceiling of coverage was also enhanced from Rs 15,000 per month to Rs 21,000 from January 1, 2017.


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