The Employees’ State Insurance or ESI in short is a social security scheme that benefits employees working in India for health-related problems and directs a specific ESI contribution rate
Managed by ESIC under the ESI Act 1948, it is a self-financed insurance deposit that the workforce contributes to every month from their gross salary.
There are several important questions that pop up in the heads of working professionals such as what is the ESI contribution rate, how to calculate ESI in current financial year 2025-26, what is the formula to check the deduction, what is the minimum employees for ESI do you need, and many more.
Let us walk through the answers to 9 such questions in detail:
As per the latest budget 2025-26, ESIC contribution remains the same.
As per the rules laid out by ESIC, the employees get 0.75% deducted from their respective gross salaries, whereas the employers make an ESI contribution of 3.25% of the employee’s gross pay towards ESI.
Thus, a total of 4% (employee + employer) is deposited as the ESI contribution in the account of the employee that he/she can withdraw in case of any medical emergency such as disability, maternity, unemployment among others.
How To Calculate ESI Contribution?
When calculating ESI, the elements that comprise an employee’s gross salary include Basic Pay, Dearness Allowance, City Compensatory Allowance, House Rent Allowance, Attendance & Overtime Pays, Meal Allowance, Uniform Allowance, Incentives and other Special Allowances.
Let us now understand the concept with a simple example.
If the Gross Salary of an employee is INR 15,000,
The Employee’s ESI contribution rate would be: 0.75/100 * 15,000 = INR 112.5
And the ESI employer’s contribution rate would be: 3.25/100 * 15,000 = 487.5
Hence, the total ESI contribution would be: 112.5 + 487.5 = INR 600
What is the eligibility and applicability for ESI contribution?
ESI is applicable to organizations that have a strength of 10 or more employees working full-time with them.
It is compulsory for every working professional who earns less than INR 21,000 a month to get registered under this scheme.
The ones getting monthly wages of more than this amount have an option to make a choice of getting the fund deducted or not.
Why do employees need ESI?
Employees registered under the Act are offered full medical care at the time of incapacity to work.
Financial assistance is given to cover the loss incurred from absenteeism from work due to sickness, maternity, disability, or injury during employment.
The scheme also provides medical help to the family members of the registered employees.
Apart from ESI, there are other employee benefits that every professional must know.
How to get an ESI Contribution card?
The government ESIC portal ESIC Portal gives an option to the registered employers to download the ESI or penchant application form online and fill in the employee details.
The employee then needs to do some needful like attaching a family photograph to the form and duly attesting it.
After performing the relevant verifications, the ESIC office issues an ESI card to the applicant/employee.
What Is the ESI Number?
The ESI code number is a 17-digit number unique ID given to each of the beneficiaries of the scheme.
It is allotted to each of the factories/establishments registered under the provisions of the ESIC Act,1948.
One can generate this number through ESIC portal on submission of the pertinent information by the employer.
What is the penalty for late/non-payment of ESI?
Complying with the ESIC Act is crucial for employers and negligence in payment or delays have severe penalties like:
- For each day by which the ESI contribution is delayed, the registered employer is charged a simple interest of 12% per annum.
- Non-payments, delays, and fraud activities in ESI payment may also lead to imprisonment for a period of upto 2 years,
- And a fine of INR 5,000.
- The ITA (Income Tax Act) also disallows ESI contributions deposited after the stipulated date.
- No deduction benefit, leading to creating taxable income on it.
How to Claim ESI Contribution Benefit?
One can get ESIC Form-9 to make a claim in case of Sickness/ Temporary Disablement/ Maternity Benefit as provided by the Employees’ State Insurance Corporation, Ministry of Labour and Employment, Government of India.
There are two types of ESI benefits for employees that one can claim as a beneficiary of the ESI scheme, as mentioned below:
Medical Benefits: The employee and his/her dependents can avail themselves of medical care. To avail this, they need to visit any of the ESI empanelled hospitals.
Cash Benefits: Employees or workers who are beneficiaries of the ESI scheme can avail cash benefits in the case of sickness, disablement (temporary/permanent), maternity, unemployment, dependent, funeral costs, and vocational or physical rehabilitation.
Can I Claim ESI Benefits for Employees in a Private Hospital?
Yes, it is possible to claim ESI in a private hospital. As mandated by the ESI Act, treatment has to be taken only from the ESIC hospitals or dispensaries.
However, in case of emergency, if the treatment is taken from a private hospital, one can raise a claim with the ESIC subject to ESIC approval and only then will the reimbursement of the expenses be processed.
The ESIC has collaborated with a number of hospitals PAN India available on the ESIC online portal where one can claim the ESI amount.
ESI Contribution: The Summary
ESI Contribution is a statutory responsibility for employers who run factories and establishments with 10 or more employees.
According to ESI rules for the employee, any worker with less than 21,000 INR (25,000 for ones with disabilities) is eligible for the benefits mandated under the Employee’s State Insurance Act, 1948.
Where ESI Contribution is crucial for employers for legal compliance, it also ensures social security and the overall employee well being. Other ESI benefits for employees include maternity benefits, disability, wage compensation, and comprehensive healthcare that maintain an overall positive work culture and fuels productivity.