The Employees' State Insurance Act 1948 (ESI Act), now consolidating under the Social Security Code 2020, provides health insurance and social security to workers. ESI is administered by the Employees' State Insurance Corporation (ESIC). Compliance is mandatory for covered establishments from day one of applicability.
Applicability
- Factories with 10+ employees (manufacturing)
- Shops, restaurants, cinemas, road transport, hotels, newspapers with 10+ employees
- Coverage is automatic — once an establishment is covered, it remains covered even if headcount drops
- Employee wage ceiling: Rs. 21,000/month (Rs. 25,000 for disabled persons). Employees above this ceiling are exempt.
Contribution Rates
| Contributor | Rate |
|---|---|
| Employee contribution | 0.75% of gross wages |
| Employer contribution | 3.25% of gross wages |
| Total combined | 4% of gross wages |
Employees earning up to Rs. 176/day (daily wage equivalent) are exempt from employee contribution.
Registration Process
- Register online at esic.in portal within 15 days of applicability
- Upload details: establishment type, employee list, wages
- Each employee gets an IP (Insured Person) Number and ESI card
- IP can add family members as beneficiaries
Benefits Under ESI
| Benefit | Description |
|---|---|
| Medical Benefit | Full medical care for insured person + family from day 1 |
| Sickness Benefit | 70% of daily wages for up to 91 days for certified sickness |
| Maternity Benefit | 100% wages for 26 weeks (paid via ESI for covered establishments) |
| Disablement Benefit | 90% of daily wages for temporary/permanent disablement |
| Dependant Benefit | 90% of daily wages to dependants on employee death due to work |
| Funeral Expenses | Rs. 15,000 lump sum |
Monthly Compliance
- Contributions paid by 15th of the following month
- Electronic challan filing on ESIC portal
- Half-yearly returns (Form 5) due within 42 days of contribution period end
Penalty for Non-Compliance
- Late payment interest: 12% per annum
- Damages for delayed deposit: 5%-25% depending on delay
- Imprisonment up to 2 years + fine for persistent default
Need Expert Help?
TaxClue's CA and legal team can assist you. Contact us or see our services.
Need Help with Compliance?
Our CA experts guide you through the entire process — registration to filing.
Frequently Asked Questions
What is the employee ESI contribution rate?
0.75% of gross wages. Employer contributes 3.25%. Employees earning up to Rs. 176/day are exempt from the employee portion.
What is the wage ceiling for ESI coverage?
Rs. 21,000/month (Rs. 25,000 for disabled persons). Employees above this salary are exempt from ESI.
What maternity benefit is available under ESI?
100% wages for 26 weeks maternity leave, payable through ESIC for covered establishments.
When must ESI contributions be deposited?
By the 15th of the month following the contribution period.
Does ESI cover medical treatment for family members?
Yes. Medical benefit covers the insured person and their entire family (spouse, children, dependent parents) from day 1 of coverage.
What happens if an establishment falls below 10 employees after registration?
ESI coverage is permanent once triggered. Even if headcount drops below 10, the establishment remains covered.
Was this article helpful?
Thank you for your feedback!
Need help with Labour Laws?
- Pvt Ltd Registration
- LLP Registration
- OPC Registration