ESIC scheme: Reduction in insurance contribution of employers, employees takes effect

From October 2016, the employees and employers contribution rate in Employee's State Insurance Corporation (ESIC) had been reduced to 1% and 3% of the wages respectively from 1.75% and 4.75% in the first time implemented areas for the initial 24 months from the date of implementation.

However, there have been some glitches in the software which is preventing the employers to upload the correct values against the contribution of employees. So till the time the modifications are made to the software, the employers have been asked to file the monthly contribution details as usual.

However, for the actual payment into the bank account, the employees need to calculate at the reduced rate, which will be reconciled by the ESIC at a later date.


ESIC benefits
Under the ESIC Act, the employees enjoy six benefits, including those related to sickness, maternity and disability, as well as meeting medical costs.

An employer is liable to pay his contribution for every employee and deduct the employee’s contribution from wages bill and pay these contributions at the above specified rates to the ESIC within 21 days of the last day of the calendar month in which the contributions are due.

If the contribution period is April 1 to September 30, the benefit period is January 1 to June 30 of the following year, and for the October 1 to March 31 of the year, the benefit period is July 1 to December 31. The employees, therefore, should ensure that the employer has deposited the employees contribution in the bank within the stipulated time.

Coverage and reach
The Act is applicable to non-seasonal factories employing 10 or more persons and has been extended to shops, hotels, restaurants, private medical and educational institutions, cinemas and newspaper establishments employing 20 or more persons. Fourteen state governments/Union Territories have reduced the threshold limit for coverage of shops and other establishments from 20 to 10 or more persons. The remaining state governments/UTs are in the process of reducing the same. The Act is followed in all the states, except Manipur, Sikkim, Arunachal Pradesh and Mizoram.

The wage limit for coverage under the Act has been incresed from Rs 15,000 per month to Rs 21,000 as per the Ministry of Labour and Employment
Notification (G.S.R. 1166 (E))dated 22nd December, 2016.

As on March 31, 2015, the number of insured person family units was 2.03 crore, while the number of employees covered were 1.79 crore, with the total number of beneficiaries being 7.89 crore. The total number of employers registered was 7.23 lakh.

The ESIC has been paying cash benefits to its beneficiaries directly in their bank accounts. It spent a total of Rs 6,819.47 crore in 2015-16 on medical, cash and other benefits to its over 2.5 crore subscribers.

Upcoming reforms
Recently, the Labour Ministry opened up a three-month window for the employers to register themselves and their employees under the ESIC to avail of the government’s medical facilities.

It is a one-time opportunity to encourage the employers to register themselves and their employees -- contractual, casual, or temporary -- who have been left out coverage. The proposed scheme will remain open for a period of three months from January 1 to March 31, 2017. In another attempt, over 2 crore formal sector workers will soon have an option to choose health insurance products available in the market (from private players) in lieu of the mandatory scheme run by the ESIC.