Employees' State Insurance (ESI)

Understand the ESI rules for Employee 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 aimed at providing benefits to employees in case of sickness, maternity, employment injury and certain other related matters. Under this self-financing health insurance scheme, funds are primarily built out of contribution from employers and employees. 

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 be calculated on the gross salary (Basic and LOP dependent allowances) upto ₹21,000. If 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. 

  • Do you have more than 10 employees?
  • Does your employees qualify per the rules mentioned above? 
  • If you answered yes to both the above questions, please register yourselves with the ESI Corporation of India.
  • Detailed instructions are provided on this page. Click here.

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. 

ESI Calculations are complicated and Sumopayroll made it easy to process payroll with ease and also do the ESI calculations and to see if you qualify for ESI contributions.  Sumopayroll also provides an ESI report that is easy to read and will provide related filing details for you to be in compliance.  Signup for Sumopayroll for Free!

Recommended Reading:

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

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