Employee state insurance corporation has reduced the ESIC contribution rates to 4% (employer contribution) and 1%(employee contribution). Till now only the draft notification was released, once the official gazette notification release then the reduced ESIC contribution rates will become effective. For March 2019 ESI Challan employers need to pay previous 4.75% of employer contribution and 1.75% of employee contribution.
Details of the Draft notification
In Rule 51 of the Employees’ State Insurance (Central) Rules, 1950, the following amendment shall
(a) In Rule 51(a) for the words “equal to four and three fourth percent of the wages”, the words
“equal to four percent of the wages” shall be substituted.
(b) In Rule 51(b), for the words “equal to one and three fourth percent of the wages”, the words
“equal to one percent of the wages” shall be substituted.
ESIC Contribution Rates Old & New
Till now employer is contributing 4.75% and the employee is contributing 1.75% of total gross salary towards ESIC & we all know ESI is applicable to employees whose monthly gross is equal to or less than 21000 Rs.
So a total of 6.50% of employee gross salary is going to ESIC, it is really a huge amount if these rates are decreased it will reduce some burden to employee and employer. Now the total ESIC contribution has reduced to 5% and it increases the in hand salary of the employees.
Present ESIC contribution rates
- Employer contribution 4.75%
- Employee contribution 1.75%
- Total Contribution 6.50%
New ESIC contribution rates
- Employer contribution 4 %
- Employee contribution 1%
- Total contribution 5%
Use of new ESI contribution rates
If the ESIC contribution rates decrease then the in hand salary of employees will increase and for employers also it reduces some burden. The reduced ESIC contribution rates motivate employers to bring more employees in employee state insurance scheme.
Effective from which date
On 15th February 2019 only draft notification(only proposal) has released but the official gazette notification was not yet released, once the official gazette notification release then the new ESIC contribution rates will become effective. Keep visiting this page for the latest updates on ESIC reduced contribution rates.
Affect on ESIC benefits
No, there is no affect on ESIC benefits. All the benefits for ESIC members will remain the same and the reduction in ESIC contribution rates is only to bring more employees in ESIC scheme.
Eligibility for ESI scheme
Employees whose monthly gross salary is 21000 or below 21000 Rs are eligible for employee state insurance scheme. Here is the notification on ESI eligible salary limit.
ESIC contribution calculation
For example, if an employee gross wage is 18000 Rs then the ESIC contributions of employee and employer will be calculated in the following manner. ( as per present ESIC contribution rates)
Employee contribution 1.75% = 18000 x 1.75% = 315
Employer contribution 4.75% = 18000 x 4.75% = 855
Total contribution = 1170 Rs
ESIC contribution calculation as per reduced contribution rates
Employee contribution 1% = 18000 x 1.75% = 180
Employer contribution 4% = 18000 x 4.75% = 720
Total contribution = 900 Rs
How ESIC collects contributions
Every employer needs to make ESIC contribution payments within 15 days after the following month. If employers aren’t able to pay ESIC contribution on or before ESIC due date then they need to pay penalties.
Employers need to login to their ESIC employer portal at the esic.in website. After login, they need to enter the ESIC contributions of their employees by clicking on pay monthly contributions or they can also upload a bulk excel sheet of all the employees contributions. Once they upload the excel sheet then a challan will generate. Now employers need to make the payment of that ESIC challan.
Employees who have contributed for ESIC will be eligible for ESIC cash benefits in ESIC beneficial period, here is the table of ESIC contribution period and cash benefit period.