ESI Contribution & Calculation

15306 views • 2 mins read

Employees’ State Insurance is a social security scheme that benefits employees working in India for health related problems. 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. 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. Those getting monthly wages of more than this amount have an option to make the choice of getting the fund deducted or not. The most important question that pops up in the head of employees is how to calculate ESI and what is the formula to check the deduction. 

Let us walk through the answers to such questions in detail:

What Is The Contribution For ESI?

As per the latest 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 sent as the ESI contribution in the account of the employee that he/she can withdraw in case of any medical emergency such as in case of disability, maternity, unemployment among others. 

How To Calculate ESI?

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 share of contribution would be: 0.75/100 * 15,000 = INR 112.5

And, the Employer’s share of contribution would be: 3.25/100 * 15,000 = 487.5

Hence, the total ESI contribution would be: 112.5 + 487.5 = INR 600

Make your Payroll fun and easy!

Learn how HROne Payroll software can help you automate Payroll & stay 100% compliant!

Sukriti Saini

Sukriti Saini works as a content marketing strategist at HROne. She has done Bachelors in Journalism from Delhi University and carries several years of experience in content development. HR trends, Productivity, Performance and topics related to Employee Engagement garner most of her writing interest here. During leisure, she loves to write and talk about fashion, food & life.

Follow me on Linkedin to stay updated on the latest HR trends

View all author posts →