The Ministry of Labour and Employment, Government of India, has amended the Employees’ State Insurance (Central) Rules, 1950 by introducing a new rule called Rule 51B, stated as follows.
“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:-
(a) Employer’s contribution – A sum (rounded to the next higher rupee) equal to three per cent of the wages payable to an employee; and
(b) Employee’s contribution – A sum (rounded to next higher rupee) equal to one per cent of the wages payable to
Provided that on completion of twenty-four months from the date of implementation of the Act, the rate of contribution as provided under rule 51 shall be applicable.”
You can read the gazette notification dated 06-Oct-2016 here.
What does the notification say?
As per Rule 51 of the Employees’ State Insurance (Central) Rules, 1950, the employer’s contribution to ESI is 4.75% of an employee’s ESI wage while the employee contribution is 1.75% of the employee’s ESI wage.
The Employee State Insurance Corporation continually expands its operations to cover new areas all over India. According to the notification, the ESI calculation for new ESI locations shall be as follows.
Employer contribution: 3% of wage, rounded to next higher rupee
Employee contribution: 1% of wage, rounded to next higher rupee
The above rates shall be in force for a period of 24 months from the time a new ESI location is introduced. After 24 months from the date of implementation of a new ESI location, the ESI calculation shall be as per Rule 51 (Employer contribution at 4.75% of wage and Employee contribution at 1.75% of wage).
In case your organization has operation in a place where ESI is implemented for the first time, this notification shall be relevant to you. Given that the ESI remittance happens for each location code, we presume that the ESI portal will be able to validate the ESI contribution calculations as per the rates notified for new ESI locations.