The Government of India has taken a historic decision to reduce the rate of contribution under the ESIC Act from 6.5% to 4% (employers’ contribution being reduced from 4.75% to 3.25% and employees’ contribution being reduced from 1.75% to 0.75%). Reduced rates will be effective from 01.07.2019. This would benefit 3.6 crore employees and 12.85 lakh employers.

The reduced rate of contribution will bring about a substantial relief to workers and it will facilitate further enrolment of workers under the ESI scheme and bring more and more workforce into the formal sector. Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments. It is also expected that reduction in rate of ESI contribution shall lead to improved compliance of law.

This step of Government also lead to enhanced Ease of Doing Business.

Read more about ESIC Circular 

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