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November 21,
2006
The Reach Of Employee State Insurance Benefit
Expanded
In
the exercise of its powers under the Employee State Insurance Act,
1948 (“Act”), the
Ministry of Labour and Employment has increased the wage limit for coverage of employees from INR
7,500 per month to INR 10,000 per month. This change came into force from
October 1, 2006. The daily rates of benefit, which are used for
the computation of the social security benefits available to the
employees under the Act, have also been amended.
Under
the Act,
the Employees State Insurance Scheme of India (“ESI
Scheme”) provides protection and benefits to employees
and their dependents in contingencies such as sickness,
maternity, death and disablement due to an injury during
performance of employment or occupational disease. This Act
thus requires employers to contribute towards one of the few
statutory social security benefits to employees.
In
the first instance, the Act is applicable to all factories.
However the Act empowers the State Governments to extend the
provisions of the Act to any other establishments or class of
establishments, industrial, commercial, agricultural or
otherwise. Previously, the State Governments had, by
notification, extended the provisions of the Act to certain
establishments which employ 20 or more employees, each of whom
drew wages of less than INR 7,500. Under
the Act, the employer and the employee are required to make the
respective contributions only in respect of the employees eligible
for such insurance cover, i.e., employees whose wages are within
the threshold limit which is now increased to INR 10,000. The
employer is required to contribute 4.75% of the wages of the
employee towards the ESI Scheme, while the employee’s contribution is
1.75% of wages. Insured employees earning upto INR 50 per day
are exempted from making the contribution, however, the
employer’s share of contribution is payable. While
the amendment has been effected to keep up with the wage increases
in most sectors of the Indian economy, employees in several
sectors, especially the IT sector where the wage levels are
higher, will continue to be excluded from the applicability of the
Act. In such cases, the employers may continue to provide
non-statutory private medical insurance benefits as a good human
resources measure.
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You
can direct your queries or comments to the authors
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Source:
Ministry
of Labour and Employment(E) dated
September 22, 2006
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