What is ESI?Employees' State Insurance

Definition

Employees' State Insurance provides medical care and cash benefits (sickness, maternity, disablement and dependants' benefits) to insured employees and their families. It is administered by the Employees' State Insurance Corporation (ESIC) and funded by employee and employer contributions.

How it works

• Coverage applies to employees with gross wages up to ₹21,000 a month (₹25,000 for persons with disability) in covered establishments.
• Employee contribution: 0.75% of gross wages. Employer contribution: 3.25% of gross wages.
• Employees whose average daily wage is up to ₹176 are exempt from their share; the employer still contributes.
• Eligibility is fixed for a contribution period (April to September, October to March). An employee who crosses ₹21,000 mid-period stays covered until the period ends.
• Contributions are due by the 15th of the following month.

Why HR and payroll teams care

ESI applicability moves with gross pay, so increments, overtime and arrears can change who is covered. Getting the contribution-period rule wrong is a common source of under-deduction.

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