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ESI Contribution India: Rates, Wage Ceiling, and How to Calculate

ESI in India is funded by both the employer and the employee. The employee contributes 0.75 percent of gross wages, the employer contributes 3.25 percent, for a total of 4 percent. The scheme applies to factories and establishments with 10 or more employees, on wages up to Rs 21,000 a month (Rs 25,000 for employees with disabilities). Contributions are due to ESIC by the 15th of the following month.

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0.75%
Employee share
3.25%
Employer share
Rs 21,000
Wage ceiling
1948
ESI Act year

What is ESI

ESI stands for Employee State Insurance. It is a statutory social security scheme run by the Employees' State Insurance Corporation under the ESI Act of 1948. The scheme gives insured workers and their dependents medical care, sickness benefit, maternity benefit, disability cover, and dependent benefit, funded by monthly contributions from the employer and the employee.

For a covered establishment, ESI is not elective. Once the headcount and wage thresholds are crossed, registration and timely remittance are a legal obligation.

Key point. ESI is contribution based. The benefits an insured employee can draw are tied to whether contributions have been paid during the relevant contribution period.

Who must register under ESI

The ESI Act applies to factories and establishments where 10 or more persons are employed. Employees whose gross monthly wages do not exceed Rs 21,000 are covered. For employees with disabilities, the ceiling is Rs 25,000.

ParameterThreshold
Minimum employees for applicability10 or more
Wage ceiling, general employeesRs 21,000 per month, gross
Wage ceiling, employees with disabilitiesRs 25,000 per month, gross
Governing legislationESI Act, 1948
Administering bodyESIC, Employees' State Insurance Corporation

ESI contribution rates

The current contribution rates have been in effect since July 2019, when the government reduced them to ease the load on both sides.

Employee
0.75%
of gross wages
Employer
3.25%
of gross wages
Total
4.00%
of gross wages
Note on new employees. Specific exemptions apply for certain categories of new or insured employees under the ESIC framework. Confirm the current exemption rules with your ESIC office before applying them, as conditions and notifications change.

How to calculate ESI contribution

The calculation runs on gross wages, which includes basic salary, dearness allowance, house rent allowance, and any other regular allowances. Overtime wages are excluded from the ESI wage base.

Employee ESI = Gross Wages × 0.75%
Employer ESI = Gross Wages × 3.25%
Total ESI = Gross Wages × 4.00%

Step by step example

Assume an employee with a gross monthly salary of Rs 18,000.

  1. Check eligibilityRs 18,000 is below the Rs 21,000 ceiling, so ESI applies.
  2. Employee contributionRs 18,000 × 0.75% = Rs 135
  3. Employer contributionRs 18,000 × 3.25% = Rs 585
  4. Total remittanceRs 135 + Rs 585 = Rs 720, deposited with ESIC by the 15th of the following month.

ESI contribution calculator

Enter an employee's gross monthly wages to see the deduction breakdown.

Contribution breakdown

Gross monthly wages
Employee (0.75%)
Employer (3.25%)
Total ESI
This employee's gross wages exceed Rs 21,000 per month. ESI does not apply, unless the disability ceiling of Rs 25,000 is in effect.

Contribution periods

ESI contributions are tracked in two six month periods each year. The benefits an employee can draw correspond to the preceding contribution period.

Contribution periodCorresponding benefit period
1 April to 30 September1 January to 30 June, following year
1 October to 31 March1 July to 31 December, same year

What is included in gross wages for ESI

Included in the ESI wage base. Basic salary, dearness allowance, house rent allowance, city compensatory allowance, incentives paid monthly, meal allowances, and any other regular cash allowances paid each month.

Excluded from the ESI wage base. Overtime wages, annual bonus, travel or conveyance reimbursements, gratuity, and one time ex gratia payments.

When must contributions be deposited

Employers deposit ESI contributions to ESIC by the 15th of the following month. Contributions for April are paid by 15 May. Late deposits attract interest and can lead to further compliance action by ESIC.

Frequently asked questions

Is ESI applicable if the employee earns above Rs 21,000?
No. Employees whose gross monthly wages exceed Rs 21,000 are exempt from ESI. The employer does not deduct or remit ESI for such employees, subject to the disability ceiling of Rs 25,000.
What happens if an employee's salary crosses Rs 21,000 mid year?
If an employee's wages cross the Rs 21,000 ceiling during a contribution period, ESI contributions continue until the end of that contribution period. The exemption applies only from the start of the next contribution period.
Are contract employees covered under ESI?
Yes. Contract employees working at a covered establishment and earning within the wage ceiling are generally covered under ESI. The principal employer typically bears responsibility for ESI compliance for contract workers engaged on the premises.
Does the ESI deduction reduce take home pay?
Yes. The employee share of 0.75 percent is deducted from gross wages and shows as a deduction on the payslip. The employer share of 3.25 percent is borne by the employer and does not affect take home pay.
What benefits does ESI provide?
ESI provides medical care for the insured worker and dependents through ESIC hospitals and dispensaries, sickness cash benefit, maternity benefit, disablement benefit for employment injury, and dependent benefit. The scope depends on the contribution record.
How is ESI different from PF?
ESI funds medical and social security cover, capped at Rs 21,000 of monthly wages. PF is a retirement savings scheme funded by 12 percent employer and 12 percent employee, both capped at Rs 15,000 wage ceiling under Para 26A. The two run in parallel for employees who fall under both schemes. See the PF calculation guide for details.

How Offrd handles ESI on every payslip

Offrd computes ESI on each employee's gross wages while generating the monthly payslip. Eligibility is checked against the Rs 21,000 ceiling, the 0.75 percent employee share appears on the payslip as a deduction, and the 3.25 percent employer share sits in the payroll cost record. The same logic runs for PF and Professional Tax based on each employee's state.

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