Employees' State Insurance (ESI)

Understand the ESI rules for Employees and Employer

What is Employees State Insurance (What is ESI?)

Employees State Insurance (ESI) Act, Indian Ministry of Labor 1948 (ESI Act) is a social security legislation that provides employee benefits in case of sickness, maternity, employment injury, and other related matters. Under this self-financing health insurance scheme, employers and employees primarily contribute to building funds.

ESI Calculator

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ESI Contribution

ESI fund, maintained by ESIC (Employee State Insurance Corporation), is applicable to employees earning ₹21,000 or less per month to provide the cash and medical benefits to them and their families. This fund is a contributory fund in which both the employer and employee contribute 3.25% and 0.75% respectively to make it a total of 4% of their base salary.

How is ESI Calculated? How much ESI Contribution is made by Employee and Employer?

For ESI calculation, consider the salary components that comprises of all the monthly payable amounts such as basic pay, dearness allowance, city compensatory allowance, HRA, incentive allowance and meal allowance. The base salary, however, does not include the annual bonus, retrenchment compensation, encashment of leave and gratuity.

Here is an example of a employee making the following :

  • Wages: Rs. 20,000 per month.
  • Employee Contribution: 0.75 % = Rs. 150 per month.
  • Employer Contribution: 3.25 % = Rs. 650 per month.

Employees’ State Insurance Scheme will calculate the gross salary (Basic and ESI applicable allowances) up to ₹21,000. If the Gross is above ₹21,000, ESI will be constant.

Does my company need to file ESI returns?

All employers that have qualified employees for ESI should enroll with the Employees’ State Insurance Corporation and deposit ESI funds into the company accounts.

ESI filing Deadlines for Employers:
All employers can file the returns on the ESIC website and the deadline for such filing is:

  • 12-November for period April 1st to September 30th
  • 12-May for period October 1st to March 31st.

Employee ESI Details:

Employees should be able to login and see their fund details in the ESIC website .

ESI Compliance is a very important matter for employers that qualify. Failing to comply and file your ESI contributions will lead to penalties and fees from the government.

Sumopayroll has simplified ESI calculations, making it easy to process payroll and determine eligibility for ESI contributions. Additionally, Sumopayroll offers an easy-to-read ESI report that provides related filing details to ensure compliance. Signup for Sumopayroll for Free!

Recommended Reading:
Click here for a detailed blog post – How is ESI Calculated ?

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