Mr. X earns wages of₹ 20,000 per month. What will be the contributions to the ESI Scheme under the Employees' State Insurance Act, 1948?

Correct option is B

The correct option is (b). Employer's contribution ₹650; Employees' contribution ₹150

Explanation:

The contribution rates for the ESI scheme were significantly reduced by the Government of India effective from July 1, 2019. The current rates are:

• Employer’s Contribution: 3.25% of wages
• Employee’s Contribution: 0.75% of wages

Calculation for Mr. X (Wages = ₹20,000):

• Employer Share: 20,000 × 3.25% = 650
• Employee Share: 20,000 × 0.75% = 150

Total Contribution = $650 + 150 = 800

Information Booster

The ESI Scheme is a multidimensional social security system designed to provide socio-economic protection to workers in the organized sector.

• Wage Ceiling: The scheme is mandatory for employees earning up to ₹21,000 per month (₹25,000 for persons with disabilities). Since Mr. X earns ₹20,000, he is covered.
• Establishment Coverage: It applies to factories and establishments (like shops, hotels, cinemas) employing 10 or more persons.
• Exemption for Low Wages: Employees whose average daily wage is ₹176 or less are exempt from paying their share (0.75%), but the employer must still pay the 3.25% share.