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India – Staffing Federation opposes rise in salary cap for benefits

25 September 2013

The Indian Staffing Federation (ISF), an apex body of flexible staffing industry in India, announced that it opposed the Labour Ministry's decision to raise the salary cap of Employees' State Insurance Corporation (ESIC) beneficiaries to RUP 25,000 (USD 400) from the current RUP 15,000 (USD 240), reports the Business Standard.

ISF, in its statement, said that as of 2012, the ESIC was sitting on a fund in excess of half the contribution of RUP 707 billion (USD 1.1 billion). "That amounts to [a] substantial fund to address the plaguing issues around inadequate doctors, poor diagnostic services and non-availability of common drugs.  It is more critical to address the absolutely lack of faith in the institution of ESIC amongst the very people that the authorities are presumably trying to protect," it said.

According to ISF, an employee with a gross salary of RUP 25,000 (USD 400) adds up to a ‘Cost to Company Salary’ of approximately RUP 28,000 (USD 447). This move to raise the salary cap could lead to an additional burden of RUP 1,200 (USD 19.15) for employers for every employee with gross salary of RUP 25,000 (USD 400) and decrease the net pay of the employee by RUP 450 (USD 7.18).

The ISF explained that given the uncertainty affecting industries, this is yet another step discouraging job creation and encouraging available work to be shifted to the informal sector. 

It stated: "ISF acknowledges wholeheartedly that ESIC is a one-of-a-kind healthcare scheme in today’s world, however, ISF would urge the ESIC authorities to take on greater accountability in making the scheme actually beneficial for all those they are attempting to protect by way of ease of access to basic healthcare facilities as and when they require completely doing away with their need to visit any other Private or Government Hospital or giving them the flexibility to choose the kind of healthcare they want for themselves."

According to the ISF, the expected outcomes of this salary cap for ESIC benefits would be:

  • More jobs would move to the informal sector
  • It would affect the net pay of employees, causing widespread dissatisfaction
  • There would be an added financial burden to industries
  • There would be an increase in the unutilised ESIC fund by ESIC
  • There would be little accountability taken by ESIC authorities towards improving the state of existing ESIC infrastructure

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