Employee State Insurance or ESI

What is ESI?

Employee State Insurance Scheme of India is a multidimensional social system tailored to provide socio-economic protection to worker population and their dependents covered under the scheme. It provides full medical care for self (contributor) and their dependents, which is admissible from day one of insurable employment.

Insured persons are also entitled to a variety of case benefits in times of physical distress due to sickness, temporary or permanent disablement and such which results in loss of earning capacity, the confinement in respect of insured women, dependents of insured persons who die in industrial accidents or because of an employment injury or occupational hazard are entitled to a monthly pension called the defendant’s benefit.

ESI applicability:

  1. ESI Act applies to all non-seasonal factories (including Government factories) which employ 10 or more employees and carry on a manufacturing process with the aid of power.
  2. ESI Act is also applicable for all non-seasonal and factories not using power employing 20 or more persons
  3. The scheme was further extended to shops, hotels and other establishments with 20 or more employees

ESI coverage and contribution:

All employees, casual, temporary or contract workers whose gross earnings are less than Rs.21, 000 per month (with effect from January 2017) are covered under the act.

ESI contribution:

Contribution to ESI is made both by the employer and the employee. The rate of contribution is:

  • Employee’s contribution – 1.75% of the gross earnings
  • Employer’s contribution – 4.75% of the gross earnings

A total of 6.50% has to be calculated and remitted by the employer.

The due date for payment of ESI is on or before 21st of the following month, to the month to which the salary relates. E.g.: If ESI is deducted from the salary of July month, then the remittance has to be done on or before 21st of August.

If the employee is drawing up to Rs.75/- as daily average wage, he is exempt from the payment of his share of contribution. The employer is however to pay employer’s share of 4.75% of the salary received/receivable by the employee.

There are two contribution periods, each of six months duration as follows:

  • 1st April to 30th Sept.
  • 1st Oct to 31st March of the year following

ESI benefits:

The benefits under the ESI scheme can be broadly classified as follows:

  • Primary medical care
  • Specialists and diagnostic services
  • In-patient care
  • Maternity needs
  • Super-specialty treatments
  • Disablement benefits
  • Dependent benefits
  • Miscellaneous benefits like Funeral expenses, Rehabilitation allowance, Old age medical care etc.
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