ESI (Employees' State Insurance)

What it means

Employees’ State Insurance (ESI) is a health and social security scheme run by the ESIC for lower-paid employees. In return for a small monthly contribution, covered employees and their families get free medical treatment at ESI hospitals and dispensaries, plus cash benefits for sickness, maternity, disablement from employment injury and dependants’ benefit on death.

How it works

ESI applies to factories and notified establishments that employ 10 or more people in most states. Employees whose gross wages are up to ₹21,000 a month (₹25,000 for persons with disability) are covered.

• Employee share: 0.75% of gross wages.

• Employer share: 3.25% of gross wages.

• Due date: contributions are paid online by the 15th of the following month.

• Contribution periods: April to September and October to March. If wages rise above ₹21,000 during a period, contributions continue until the end of that period.

• Employees earning a low average daily wage notified by ESIC are exempt from their own share, but the employer still pays its share.

Example

A small factory in Vapi has 14 workers. Suresh earns gross wages of ₹18,000 a month.

Employee share: 0.75% x ₹18,000 = ₹135, deducted from his salary

Employer share: 3.25% x ₹18,000 = ₹585

Total deposited: ₹720 for the month

For October 2026, this ₹720 must reach ESIC by 15 November 2026. If Suresh gets a raise to ₹22,000 in December 2026, he stays covered and contributions continue on ₹22,000 until 31 March 2027 (employee share ₹165, employer share ₹715). From April 2027 he moves out of ESI.

Key points to remember

• Gross wages include basic, DA and most allowances paid monthly; do not calculate ESI on basic pay alone.

• Register every new employee on the ESIC portal from the date of joining so they can get treatment immediately.

• Late payment attracts interest and damages, and an employer who deducts the employee share but does not deposit it faces prosecution risk.

• Employees covered by ESI are usually not covered by the employer’s group health policy for the same benefits; check your policy terms.