Government reduces ESI contribution rate to 4 per cent

By a notification dated 13th June, the Ministry of Labour and Employment has published the Employee’s State Insurance (Central) Amendment Rules, 2019. By this amendment, the Government has reduced the contributions rate made by employers and employees towards ESI Scheme to 4 % from existing rate of 6.5%. This 4% includes employer’s contribution of 3.25% plus employee’s contribution 0.75%.

The new rate will increase the take-home salary of workers as well as reduce the financial burden of the employer which will enhance employment growth.

The reduced rates will be effective from July 1, 2019. Thus, the new rate of towards ESI Scheme are:

  1. employer’s contribution rate will be 3.25%. Previously, it was 4.75%
  2. employees’ contribution will be to 0.75 %. Previously it was 1.75%

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