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How ESI is Calculated in India — Complete Guide

What is ESI / ESIC?

ESI stands for Employee State Insurance, a self-financing social security and health insurance scheme for Indian workers. It is managed by the Employee State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment, Government of India. The ESI Act, 1948, provides for medical, cash, maternity, disability, and dependent benefits to employees and their families. The scheme covers employees in factories, shops, establishments, and other entities that meet the minimum employee threshold.

ESI Contribution Rates for FY 2026-27

The current ESI contribution rates are:

The employee contribution rate was reduced from 1.75% to 0.75% and the employer rate from 4.75% to 3.25% effective from July 2019. These reduced rates have been continued for FY 2026-27.

ESI Wage Limit — ₹21,000 per Month

ESI is applicable only when an employee's monthly gross salary is ₹21,000 or less. Gross salary includes basic pay, dearness allowance, city compensatory allowance, and all other allowances paid in cash. If your gross salary exceeds ₹21,000, ESI does not apply — neither you nor your employer needs to contribute. The wage limit was last revised from ₹15,000 to ₹21,000 with effect from 1 January 2017. For employees with disabilities, the wage ceiling is ₹25,000 per month.

ESI Benefits Explained

The ESI scheme provides six types of benefits to insured employees:

• Medical Benefit: Full medical care for the insured person and their family at ESIC hospitals, dispensaries, and panel clinics. This includes outpatient and inpatient treatment, specialist consultations, medicines, and diagnostic tests — all free of cost. Medical benefit starts from day one of employment.
• Sickness Benefit: Cash compensation at 70% of average daily wages for up to 91 days in two consecutive benefit periods. Extended sickness benefit at 80% of wages is available for up to 2 years for specified long-term diseases like TB, cancer, and mental illness.
• Maternity Benefit: Full wages (100%) for 26 weeks, which can be extended by one month on medical advice. This is among the most generous maternity benefits globally. The employee must have contributed for at least 70 days in the two preceding contribution periods.
• Disablement Benefit: For temporary disability, 90% of average daily wages is paid for the entire duration of disability. For permanent disability, a monthly pension proportional to the loss of earning capacity is paid for life.
• Dependants' Benefit: In case of death of an insured person due to employment injury, dependants receive a monthly pension equal to 90% of the average daily wages. This continues for life (for widow/widower) or until age 25 (for children).
• Funeral Expenses: A lump sum of up to ₹15,000 is paid to the person who performs the funeral of the deceased insured person.

When Does ESI Apply?

ESI registration is mandatory for the following establishments:

• Factories: Employing 10 or more persons (with power) or 20 or more persons (without power)
• Shops and Establishments: Employing 20 or more persons in most states. Some states like Delhi, Maharashtra, and Karnataka have extended coverage to establishments with 10 or more employees.
• Other entities: Hotels, restaurants, cinemas, road transport, newspaper establishments, and private educational institutions as notified by respective state governments.

Once an establishment is covered, all employees earning up to ₹21,000 per month must be registered under ESI. The employer cannot choose which eligible employees to cover — it is mandatory for all.

ESI Registration Process

Employers must register their establishment on the ESIC portal within 15 days of the Act becoming applicable. The process involves:

1. Visit the ESIC portal at esic.gov.in and click on Employer Login
2. Select "Sign Up" for new employer registration
3. Fill in establishment details including name, address, type, and date of commencement
4. Enter PAN details and bank account information
5. Upload supporting documents (PAN card, address proof, registration certificate)
6. Submit the application and receive a 17-digit employer code number
7. Register each eligible employee and generate their ESI IP numbers

Contributions must be deposited by the 15th of the following month. Late payment attracts interest at 12% per annum.

For a complete salary breakdown including ESI, PF, and income tax, use our CTC to In-Hand Salary Calculator. To understand PF contributions alongside ESI, check our PF Calculator. If you work in Delhi, learn about Professional Tax in Delhi. For automated ESI compliance and payroll processing, explore our Payroll Software.