Employees' State Insurance (ESI) applies to factories and notified establishments with 10 or more employees. It covers employees whose gross wages are up to ₹21,000 a month. The employee contributes 0.75% of wages and the employer contributes 3.25%, a total of 4%. The employer deducts the employee's share from salary and pays both shares to ESIC by the 15th of the following month.
Which employers are covered
The Employees' State Insurance Act, 1948 applies to factories and to establishments such as shops, hotels, restaurants, cinemas, road transport undertakings, private educational and medical institutions, where 10 or more persons are employed. The scheme is implemented area by area, so check on the ESIC website whether your district is notified.
Once covered, an establishment continues to be covered even if the number of employees later falls below the threshold.
India's four Labour Codes, including the Code on Social Security, 2020, were brought into force in November 2025 and are being rolled out with rules and transition arrangements. PF and ESI continue to operate through EPFO and ESIC. Check the latest notifications before relying on any figure here.
Which employees are covered
An employee is covered if their wages are up to ₹21,000 a month. A higher limit applies to employees with a disability. Employees above the limit are outside ESI, and the employer usually arranges other medical cover for them.
ESI wages are wider than PF wages. They generally include basic pay, dearness allowance, house rent allowance and other allowances paid every month. Take your consultant's view on items such as overtime, incentives and annual bonus, which are treated differently.
Contribution rates
| Contribution | Rate | Who bears it |
|---|---|---|
| Employee | 0.75% of wages | Deducted from the employee's salary |
| Employer | 3.25% of wages | Paid by the employer, not deducted from salary |
| Total | 4% of wages |
Example: on gross wages of ₹18,000, the employee's share is ₹135 and the employer's share is ₹585, so ₹720 is paid to ESIC for the month. Each contribution is rounded up to the next rupee.
Employees on very low daily wages are exempt from paying their own share, while the employer still pays its share. The daily wage figure for this exemption is notified by ESIC.
Contribution periods and what happens when salary crosses ₹21,000
ESI runs in two contribution periods each year: 1 April to 30 September and 1 October to 31 March. Cash benefits for each contribution period are available in a matching benefit period that starts a few months later.
If an employee's wages rise above ₹21,000 in the middle of a contribution period, the employee remains covered until that contribution period ends, and contributions continue on the wages actually paid. Coverage stops from the start of the next contribution period.
Monthly payment and filing
- Register the establishment on the ESIC portal and get the employer code.
- Register each covered employee so that they get an insurance number and can use ESI dispensaries and hospitals with their family.
- After payroll each month, upload the monthly contribution details and pay the challan online.
- Pay by the 15th of the following month. Delay attracts interest and damages.
What employees get from ESI
ESI is insurance, not a savings account. In return for the contributions, the employee and dependants get medical care, and the employee gets cash benefits during sickness, maternity and disablement from employment injury. Dependants get a benefit if the employee dies from an employment injury. The conditions for each benefit are set by ESIC.
How FundRaksha HR handles ESI
On the Pro and Enterprise plans, FundRaksha HR applies ESI for salaries up to ₹21,000 a month at 0.75% for the employee and 3.25% for the employer, and prepares the ESI contribution file every month along with the PF ECR, professional tax, TDS, bank and Tally files. See features.
Frequently asked questions
What is the ESI contribution rate?
The employee pays 0.75% of wages and the employer pays 3.25%, a total of 4%.
What is the salary limit for ESI?
Employees with wages up to ₹21,000 a month are covered. A higher limit applies to employees with a disability.
How many employees are needed for ESI to apply?
ESI applies to factories and notified establishments with 10 or more employees, in areas where the scheme has been implemented.
What happens if an employee's salary goes above ₹21,000 during the year?
The employee stays covered, and contributions continue, until the end of the current contribution period (30 September or 31 March). Coverage stops from the next period.
What is the due date for ESI payment?
The 15th of the month following the wage month.
This guide is general information for Indian employers, not legal or tax advice. Rates and rules change; confirm the current position with EPFO, ESIC, your state department or your consultant before acting.
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