The rate of contribution under the Employees’ State Insurance (ESI) Act has been reduced from 6.5 per cent to 4 per cent.
The government apprised of the development in a statement issued on Thursday. This is the first such move since 1997.
The ESI Act 1948 provides for health-related events, such as sickness, maternity and temporary or permanent disability.
Under the Act, employers and employees contribute their share, depending on the rate of contribution which in turn is decided by the Ministry of Labour and Employment.
Currently, all employees who earn upto Rs 21,000 per month are eligible for ESI benefits — the ceiling was raised in 2017.
Additionally, in the recent change, the employer’s contribution has been reduced from 4.75 per cent to 3.25 per cent, and that of the employee is down from 1.75 per cent to 0.75 per cent.
The reduction in rates, the statement said, would “facilitate further enrolment of workers under the ESI scheme and bring more and more workforce into the formal sector”.
The reduced rates will come into effect from July 1.