Government plans to pay companies’ share of ESI for new recruits

NEW DELHI: In yet another effort to enable job creation in the formal sector, the labour ministry is considering paying the employers’ share towards the health insurance scheme under the Employees’ State Insurance Corporation (ESIC) for all new recruits.

The government had in the budget for 2018-19 committed itself to meeting the entire employer’s contribution of 12% of wages for new employees towards provident fund under the Employees’ Provident Fund Organisation (EPFO) for all sectors for the next three years under the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY).

A senior government official in ESIC told ET that an informal discussion had taken place in the ministry on the possibility of extending the coverage of PMRPY to ESIC. ESI is a self-financing social security and health insurance scheme for Indian workers managed by ESIC under the ESI Act 1948.


Under this scheme, employees earning up to Rs 21,000 a month contribute 1.75% towards ESI while the employer contributes 4.75%.

However, ESIC extends coverage to firms with 10 or more employees while EPFO covers firms with 20 or more employees.

The government sees two benefits of the scheme. “First, more jobs will be created in the formal sector and, second, firms with 10-20 employees, which were hitherto not covered under the EPF Act, will now be incentivised to provide their employees with some kind of social security,” the official said, requesting anonymity since the proposal is still at drawing board stage.

The Act covers over 8.98 lakh factories and establishments across the country and benefits about 3.19 crore family units. ESIC has more than 12.40 crore beneficiaries. It has nearly 160 hospitals and about 1,489 dispensaries. Of the 160 ESIC hospitals across the country, around 35 are run by the central government while the rest are run by respective state governments, and the Centre contributes Rs 3,000 per insured person per annum.

ESIC provides for medical care and cash benefits in the contingencies of sickness, maternity, disablement and death due to employment injury to all workers under the ESIC Act.

Under the Act, medical benefits are available to an insured person and his or her family the day he or she enters into employment. This includes primary, secondary and tertiary healthcare services ranging from preventive, promotive, curative and rehabilitative services.

Besides, out-patient services are provided through dispensaries while those covered under the law can avail themselves of in-patient services through existing ESI hospitals or arrangement with other hospitals.