Payroll and HR glossary
ESI
Employees' State Insurance
ESI is the health insurance and cash benefit scheme run by ESIC for employees earning up to ₹21,000 a month. Each month the employer pays 3.25% and the employee 0.75% of the employee's wages.
Why it matters to your business
ESI gives your lower-paid staff and their families medical care and income protection at a small cost. For you, it is a legal duty once you have 10 employees. It also covers employment injury, so an accident at work is handled by ESIC rather than falling on you alone. Late or missed contributions attract interest and damages, and an injured employee’s claim can be affected.
How it works
As of September 2026:
- Wage limit: ₹21,000 a month, ₹25,000 for persons with disability. The Labour Ministry has confirmed that the ₹21,000 limit continues under the Code on Social Security.
- Wages: since 21-11-2025 the single definition of wages in the Code on Social Security applies to ESI, as the Labour Ministry has clarified. Agree with your CA which salary components count.
- Rates: employer 3.25%, employee 0.75%. Employees with an average daily wage up to ₹176 pay no share; the employer still pays its 3.25%.
- Contribution period: if wages rise above the limit during a period, contributions continue until the period ends.
- Registration: each employee gets an insurance number and an e-pehchan card.
An example
An employee’s wages for ESI are ₹18,000 a month.
| Amount | |
|---|---|
| Employee’s share, 0.75% (deducted from salary) | ₹135 |
| Employer’s share, 3.25% | ₹585 |
| Total paid to ESIC | ₹720 |
Common mistakes
- Stopping ESI in the middle of a contribution period when an employee’s salary crosses ₹21,000.
- Not registering a new employee with ESIC from the day they join.
- Not reporting an accident at work to ESIC in time.
Questions about ESI
Which businesses must register for ESI?
Establishments with 10 or more employees in areas where the scheme is in force. Once registered, the establishment stays covered even if the number of employees falls.
Which employees are covered?
Employees whose wages are up to ₹21,000 a month, or ₹25,000 for persons with disability. The limit is checked at the start of each six-month contribution period, April to September and October to March.
When is ESI contribution due?
By the 15th of the following month, on the ESIC employer portal.
What do employees get from ESI?
Medical care for themselves and their family, and cash benefits for sickness, maternity, disablement from employment injury, and for dependants on death from employment injury, among others.
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