The Ministry of Labor & Employment on 22 December 2016 vide its Notification being G.S.R. 1166(E) and in exercise of the powers conferred by section 95 of the Employees' State Insurance Act, 1948, after consultation with the Employees' State Insurance Corporation (ESIC), notified the Employees' State Insurance (Central) Third Amendment Rules, 2016 ('Amendment Rules') amending the Employees' State Insurance (Central) Rules, 1950 ('Rules').
By way of said Amendment Rules the Ministry raised wage threshold to INR 21,000 from current INR 15000 as provided in Rule 50 of the said Rules. The amended Rule 50 will now read as under:
50. Wage limit for coverage of an employee under the Act. — The wage limit for coverage of an employee under subclause (b) of clause (9) of Section 2 of the Act shall be twenty-one thousand rupees a month: Provided that an employee whose wages (excluding remuneration for overtime work) exceed twenty-one thousand rupees a month at any time after and not before the beginning of the contribution period, shall continue to be an employee until the end of that period. Provided further that the wage limit for coverage of an employee who is a person with disability under the Persons with Disabilities (Equal Opportunities Protection of Rights and Full Participation) Act, 1995 (1 of 1996), and under the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999) respectively, shall be twenty-five thousand rupees per month.
The Amendment Rules shall come into force from 1st day of January, 2017.
The increase in wage cap has come after six years as the last increase was from INR 10000 to INR 15000 in 2010. Due to this increase in cap, industrial workers drawing a salary of up to INR 21,000 will now be eligible for health care at clinics and hospitals run by the ESIC.
The Principal Rules were published in the Gazette of India vide notification number S.R.O. 212 dated the 22nd June, 1950 and lastly amended vide notification number G.S.R. 959(E), dated the 6th October, 2016. As per Notification dated October 6, the Amendment Rules also insert a new Rule in the Rules, which is reproduced below:
"51B. In areas where the Act is implemented for the first time, the rates of employer's and employee's contribution for the initial twenty-four months from such date of implementation, shall be as under:-
- Employer's contribution - A sum (rounded to the next higher rupee) equal to three per cent of the wages payable to an employee; and
- Employee's contribution – A sum (rounded to next higher rupee) equal to one per cent of the wages payable to an employee
Provided that on completion of twenty-four months from the date of implementation of the Act, the rate of contribution as provided under rule 511 shall be applicable."
In simple words, lower rate of contributions (3% instead of 4.75% for employers and 1% instead of 1.75% for employees) will apply in areas where the Act is implemented for the first time.
The increase in wage cap will augment the burden on employers as they have to pay 4.75% of an employee's salary as ESI contribution every month (Rule 51 of the Rules). A benevolent amendment indeed for the employees; however the far reaching effect & impact thereof will be seen in times to come.
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