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Massive push for healthcare benefits: Modi govt reduces contribution of employees and employers for Employee State Insurance scheme

The ESI Act is an important provision by the Central government and forms a part of Employee health benefits. Any establishment that has more than 10 employees is required to enrol under the ESI Act.

In a massive relief for Employees and Employers across the country, the central government led by Prime Minister Narendra Modi has reduced the percentage contribution of Employees and Employers that goes towards ESI Scheme (Employee State Insurance Scheme).

The Modi government has reduced the rate of contribution under the ESI Act from 6.5% to 4% (employers’ contribution being reduced from 4.75% to 3.25% and employees’ contribution being reduced from 1.75% to 0.75%). This would benefit 3.6 crore employees and 12.85 lakh employers.

Even though establishments are compulsorily required to enrol under ESIC, several establishments avoid the enrollment due to the high percentage of contributions required to be made by the employers. The Modi government’s decision to reduce the percentage contribution of employers as well as employees is bound to increase the participation of establishments in the ESI Act.

The reduced rate of contribution will bring about a substantial relief to workers and it will facilitate further enrolment of workers under the ESI scheme and bring more and more workforce into the formal sector. Similarly, reduction in the share of contribution of employers will reduce the financial liability of the establishments leading to improved viability of these establishments.

The government of India has constantly tried to bring workers into the ambit of ESIC and as a result number of insured workers increased from 2.1 crores in 2015-16 to 3.6 crore in 2018-19.

The ESI Act is an important provision by the Central government and forms a part of Employee health benefits. Any establishment that has more than 10 employees is required to enrol under the ESI Act.

Under this act, a specified percentage is meant to be deducted from the employees’ salary and the specified percentage is meant to be contributed by the employer. The deductions and contributions are monthly and is meant to be deposited with the ESI corporation under the central government.

This amount is then used to provide free treatment of the employee should they fall unwell.

As soon as the employee is registered under the ESI Act, he starts to get free treatment from the ESI hospitals which are run and maintained by the ESI corporation (under the central government) and state governments.

Though the employee himself (IP = Insured Person) starts availing free medical treatment as soon as he is enrolled, his family (dependants) are eligible to avail free medical treatment after the completion of 2 years of being enrolled under the ESI Act.

The ‘dependants’ who can avail of free medical service after 2 years of the employee being enrolled under the ESI Act are the spouse of the employee, the children of the employee and dependent parents.

Even superspeciality treatment like cancer treatment, dialysis etc is included in the scheme. This scheme also gives pregnancy benefits to the employees. If an employee is pregnant, they get all treatment up to the delivery of the child and beyond (maternity care). ESIC also pays the salary of the lady for the statutary period of maternity leave specified by the government of India (6 months).

In fact, if an employee meets with an accident and is, for example, hospitalised for a prolonged period, other than the cost of treatment, the salary is also paid by ESIC and not the employer.

This benefit is available for employees earning a salary up to Rs. 21,000 per month. Anybody earning above Rs. 21,000 per month is not eligible for ESI scheme.

Under the ESI act, if certain tests are not available or done by the ESI hospitals, the ESIC has contracts with several private hospitals and diagnostic centres where the patient can simply show their credentials and avail of the tests. The bills are then settled by the ESIC.

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Nupur J Sharma
Nupur J Sharma
Editor, OpIndia.com since October 2017

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