The Centre's move to increase the wage ceiling for employee coverage under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, to Rs 25,000 per month from the existing Rs 15,000 per month limit is expected to benefit a larger working population and include approximately 30 lakh more workers to the Employees State Insurance (ESI) pool.
The move would also benefit 1.2 crore more people who will now be eligible for health care benefits at more than 1,500 clinics and hospitals run by the ESIC directly or indirectly. Earlier as of March 31, 2016, there were around 2.1 crore persons who were insured under the ESI Act and a total of over 6 crore beneficiaries. Employees and employers contribute to the Employees’ State Insurance Corporation at the specified rates, which are currently, 1.75 per cent of the wages (employee’s contribution) and 4.75 per cent of the wages (employer’s contribution) paid/payable in respect of the employees in every wage period.
However, the increased wage ceiling is expected to pose a challenge to employers in terms of the wage costs to be borne by them, said Nishith Desai Associates, legal and tax councillors.
Employers, it noted, would now be required to make provisions of cash benefit and health insurance for an extended employee population who draw wages up to Rs 21,000 per month. It also sees this as a challenge for the government to ensure that the quality of medical facilities (including hospital infrastructure) provided under the ESI Act are improved such that the desired benefit is achieved. It is a positive move with the objective of expanding the ambit of social security schemes to a larger working population.