Employee State Insurance (ESI) is a social security scheme that provides medical and cash benefits to employees and their families. Understanding ESI calculation is essential for both employers and employees to ensure compliance and maximize benefits.
What is ESI (Employee State Insurance)?
ESI is a self-financing social security scheme managed by the Employee State Insurance Corporation (ESIC). It provides comprehensive medical care and cash benefits during sickness, maternity, and employment injury to insured persons and their dependents.
Key Point: ESI is mandatory for establishments with 10 or more employees (in some states, 20+) and for employees earning gross wages up to ₹21,000 per month.
ESI Contribution Rates 2026
The current ESI contribution rates are:
ESI Contribution Rates
Gross wages include Basic + DA + HRA + all allowances (excluding OT)
ESI Eligibility Criteria
An employee is covered under ESI if:
- Gross salary is ₹21,000 or less per month
- Working in a covered establishment (10/20+ employees)
- The establishment is located in an ESI-notified area
What Happens When Salary Crosses ₹21,000?
If an employee's salary increases above ₹21,000:
- ESI contributions continue until the end of the current contribution period (April-September or October-March)
- Benefits continue for the corresponding benefit period
- After the contribution period ends, the employee exits ESI if still above the limit
ESI Calculation Example
Example: Monthly ESI Calculation
| Basic Salary | ₹12,000 |
| HRA | ₹4,800 |
| Conveyance | ₹1,600 |
| Special Allowance | ₹1,600 |
| Gross Wages | ₹20,000 |
| ESI Contributions | |
| Employee ESI (0.75%) | ₹150 |
| Employer ESI (3.25%) | ₹650 |
| Total ESI | ₹800 |
Components Included in ESI Calculation
ESI is calculated on gross wages, which includes:
- Basic Salary
- Dearness Allowance (DA)
- House Rent Allowance (HRA)
- City Compensatory Allowance
- Special Allowance
- Incentives and Production Bonus
- Night shift allowance
Excluded from ESI:
- Overtime wages
- Annual bonus (not production-linked)
- Conveyance allowance for duty
- Encashment of leave
- Gratuity
ESI Benefits
ESI provides comprehensive benefits to insured employees and their families:
Medical Benefits
Free medical care at ESI hospitals and dispensaries for employee and family
Sickness Benefit
70% of wages for up to 91 days per year during certified sickness
Maternity Benefit
Full wages for 26 weeks (extendable to 12 months in certain conditions)
Disablement Benefit
90% of wages for temporary disablement; pension for permanent
Dependent's Benefit
90% of wages as pension to dependents if employee dies due to employment injury
Unemployment Allowance
50% of wages for up to 1 year if retrenched or disabled
ESI Contribution Periods & Benefit Periods
ESI works on a contribution-benefit cycle:
| Contribution Period | Benefit Period |
|---|---|
| April to September | January to June (next year) |
| October to March | July to December (same year) |
ESI Registration Process
- Employer Registration: Register on ESIC portal within 15 days of becoming applicable
- Employee Registration: Submit Form 1 (Declaration Form) with photo
- Get Insurance Number: ESIC assigns a unique 17-digit IP number
- Pehchan Card: Biometric-enabled card for availing benefits
ESI Payment Due Dates
ESI contributions must be deposited by 15th of the following month:
- January wages ESI → Due by February 15th
- Late payment attracts 12% annual interest
- Damages up to 25% for default
Difference Between ESI and PF
| Aspect | ESI | PF |
|---|---|---|
| Purpose | Health & Medical Insurance | Retirement Savings |
| Wage Limit | ₹21,000 gross | ₹15,000 basic (statutory) |
| Employee Rate | 0.75% | 12% |
| Employer Rate | 3.25% | 12% |
Frequently Asked Questions
Can ESI be claimed if salary exceeds ₹21,000 mid-year?
Yes, benefits continue until the end of the current benefit period. ESI coverage stops from the next contribution period if salary remains above ₹21,000.
Is ESI applicable to contract workers?
Yes, contract workers earning up to ₹21,000 and working in covered establishments are eligible for ESI.
Can I choose my own hospital under ESI?
You can choose from ESI-empaneled hospitals. In emergencies, treatment at non-ESI hospitals is reimbursed up to certain limits.
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