The Employees’ State Insurance Act, 1948 (ESI Act) is a social welfare legislation aimed at ensuring certain benefits to all covered employees in case of sickness, maternity and employment injury. The benefits are provided through dispensaries and hospitals set-up by the Employees' State Insurance Corporation (ESIC) and a network of other hospitals having tie-ups with the ESIC.

In September 2016, Mr Bandaru Dattatreya, the Minister of Labour and Employment, Government of India, announced that the ESIC has proposed to raise the monthly wage ceiling for coverage under the ESI Act from INR 15,000 to INR 21,000. Draft rules to amend the Employees’ State Insurance (Central) Rules, 1950 (ESI Rules) were published in the Official Gazette on 6 October 2016 for inviting objections and suggestions from persons and other stakeholders likely to be affected by the proposed revision in the wage ceiling for coverage under the ESI Act.  

Recent Amendment

The Ministry of Labour and Employment, Government of India (MoL) vide its  notification published in the Official Gazette on 22 December 2016 has announced that the statutory wage ceiling for coverage under the ESI Rules has been increased from the existing limit of INR 15,000 per month to INR 21,000 per month with effect from 1 January 2017.                                       

Therefore, all existing employees and new employees in covered establishments who are drawing monthly wages up to INR 21,000 will now reap the various benefits available under the ESI Act.

Khaitan Comment

The last enhancement to the monthly wage limit under the ESI Act was in the year 2010 when the limit was hiked from INR 10,000 to INR 15,000 per month. The new wage limit of INR 21,000 is aimed at expanding the coverage of employees under the ESI Act. This decision appears to be a rationalisation to account for various factors such as inflation, salary hikes etc., and is another labour reform in line with the recent enhancement of the coverage wage limits under the Payment of Bonus Act, 1965 by MoL.