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ESI Contribution Reduced

ESI Contribution

ESI Contribution Reduced – 2019 Proposal

The Labour and Employment wing of the Government of India had recently sought an amendment of the Draft Rules concerning ESI contribution. The Gazette Notification dated 15/2/2019 proposes a reduction in both the employees’ and employers’ ESI contribution towards the scheme. This article seeks to create awareness of the directive.


Employees State Insurance (ESI) is a self-financing scheme that caters to the social security and health insurance needs of the employees. The fund is regulated by the ESI Act, 1948, and is administered by the Employees State Insurance Corporation (ESIC), which is an autonomous body that was statutorily formed by the Ministry of Labour and Employment, Government of India.

The scheme would be funded by both the employer and the employee, which would be remitted into the Employees State Insurance Fund.

The deliverables of the scheme include medical benefits, sickness benefits, maternity benefits, disablement benefits, dependent benefits, unemployment allowances, and the likes of it.


The provision is applicable to non-seasonal factories employing ten or more persons, as well as shops, hotels, restaurants, private medical and educational institutions, cinemas and newspaper establishments employing 20 or more persons (10 or more persons in some states). It is not applicable for seasonal factories, factories engaged in the pursuit of blending, packing or repacking tea or coffee or any other processes as notified by the Central Government. Also, the States of Manipur, Sikkim, Arunachal Pradesh and Mizoram are excluded from the scheme.

Current Rates of Contribution

The current rate of contribution for ESI stands at:

  • 4.75% of the wages paid/payable to the employees’ in every wage period – for employers
  • 1.75% of the wages – for employees

ESI Contribution Rates Proposed

These rates are now sought to be reduced to:

  • 4% – for employers
  • 1% – for employees

The draft notification of the same has been highlighted here for your reference:



 New Delhi, the 15th February, 2019

G.S.R. 121(E).—The following draft of certain rules further to amend the Employees’ State Insurance (Central) Rules, 1950 which the Central Government, after consultation with the Employees’ State Insurance Corporation, proposes to make in exercise of the powers conferred by Section 95 of the Employees’ State Insurance Act, 1948 (34 of 1948), is hereby published as required by sub-section (1) of the said Section, for information of all persons likely to be affected thereby and notice is hereby given that the said draft rules will be taken into consideration after thirty days from the date of publication in the Official Gazette.

Any objection or suggestion, which may be received from any person in respect of the said draft rules within the period specified above, will be considered by the Central Government.

The objections and suggestions may be addressed to Shri S. K Singh, Under Secretary, Ministry of Labour and Employment, Shram Shakti Bhawan, Rafi Marg, New Delhi-110001.


  1. (i) These rules may be called the Employees’ State Insurance (Central) (Amendment) Rules, 2019.

(ii) They shall come into force on the date of its final publication in the Official Gazette.

  1. In Rule 51 of the Employees’ State Insurance (Central) Rules, 1950, the following amendment shall be made :—

 (a) In Rule 51(a) for the words “equal to four and three fourth percent of the wages”, the words “equal to four percent of the wages” shall be substituted.

 (b) In Rule 51(b), for the words “equal to one and three fourth percent of the wages”, the words “equal to one percent of the wages” shall be substituted.

 [F. No. S-38012/01/2016-SS-I]