Last year in Jun 2019 government declared a reduction in contribution rate for ESIC. The revision of contribution rates to 4% from 6.5%. This step was much appreciated. It gave relief to employers for their contribution and also increase in hand salary of employees. Both parties were in a win situation. This move had spiked the new registrations to 19.86 lakh employees in July 2019 as per the National Statistical Organisation report. Much to the saying ‘Man Proposes & God Disposes’. The plan seems to have disturbed the financial calculation when COVID19 knocked on the doors of the Indian Economy.

All economies across the globe are suffering from the pandemic, and so is India’s. And like every government, the Indian government is also chalking plans to safeguard best of interests. The step of submitting the proposal by the Labour Ministry to Finance Ministry for increasing the wage limit for ESIC contribution from Rs. 21000/- per month to Rs. 30000/- is a small piece of the bigger plan. The intent on the surface is to cover more people under the medical benefit to strength the medical coverage with the pandemic effect on the health of citizens.

The increase in the wage limit will be adding millions of employees to the pool. It will also increase the formalisation of employment records. Current records represent more than 2.87 crore employee are registered and paying their ESIC contribution. With the increased threshold, the expectation is to spike registration by 15-20%. Under the ESIC Scheme if beneficiary falls ill, will get paid protection.

The expectation from the new scheme is to reduce the burden on the companies for medical cover. This change is also with a consideration to attach more salaries to the ESIC scheme to offer them benefits on getting unemployed. The Atal Bimit Vyakti Kalyan Yojana as part of ESIC has also been taken advantage by many during this pandemic. The new proposal also has aspects of post-retirement benefits.

In rural India, insurance still is not considered a need. As per the WHO report says that India spends 1.46% of its GDP on healthcare. India needs to focus on public healthcare facilities and infrastructure. The government will have to focus on improving the medical facilities if they are aiming to increase the coverage. One of the intentions behind bringing more employees under coverage is to increase the corpus of ESIC fund. As part of the betterment of services, the government did introduce Ayushman Bharat to enhance the private hospital network, but the role of ESIC is not exact. At the same time, the future of organisations who will adopt Code on Social Security will need the clarity of the integration.

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