Employees’ State Insurance

Why in news?

The Government of India has decided to reduce the rate of contribution under the Employees’ State Insurance (ESI) Act, 1948.

What is ESI scheme about?

• It is a self-financed comprehensive social security scheme.
• It functions under the Ministry of Labour & Employment.
• It protectsthe employees against financial distress arising out of events of sickness, disablement or death due to employment injuries.
• ESI provides for direct cash compensation for the above cases.

• Employees’ State Insurance Corporation (ESIC) is responsible for the administration of ESI Scheme.
• ESIC is a statutory corporate body set up under the ESI Act, 1948.

What are the benefits?

• Medical Benefit - Full medical care to the insured person and his family members with no ceiling on expenditure of the treatment.
• Sickness Benefit - In the form of cash compensation at the rate of 70 per cent of wages.
• Maternity Benefit - For confinement/pregnancy is payable for 26 weeks, which is extendable by further one month on medical advice.
• Disablement Benefit - 

1. Temporary disablement benefit (TDB)
2. Permanent disablement benefit (PDB)

• Dependants Benefit - Paid in the form of monthly payment to the dependants in cases where death is due to employment injury or occupational hazards.
• Other Benefits -

1. Funeral Expenses
2. Confinement Expenses
3. Vocational Rehabilitation
4. Physical Rehabilitation
5. Old Age Medical Care

What is ESI rate?

• ESI rate is fixed under the ESI Act, 1948.
• It iscontributory in nature.
• All the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act.
• The contribution payable to the Corporation in respect of an employee shall comprise of
  1. Employer's contributionand
  2. Employee's contribution.
• Payable monthly at a fixed percentage of wages paid.

What is the recent move?

• The Government has decided to reduce the rate of contribution under the Employees’ State Insurance (ESI) Act, 1948 from 6.5% to 4%, of which,
  1. Employers’ contribution being reduced from 4.75% to 3.25% and
  2. Employees’ contribution being reduced from 1.75% to 0.75%.

• The reduced rates will come into effect from July 1, 2019.

What will be the impact of the rate cut?

• It will bring about a substantial relief to workers.
• It will facilitate further enrolment of workers under the ESI scheme and will increase the workforce of the formal sector.
• Reduction in the share of employers’ contribution will reduce the financial liability of the establishments leading to improved viability of these establishments.
• May lead to enhanced Ease of Doing Business.
• May lead to improved compliance of law

Source: The Indian Express