ESI Contribution

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ESI contributionESI contribution

The ESI contribution {Employment State Insurance} is a contributory fund that is contributed by both the employee and the employer. It enables the employee’s in India to take paths in a self-financed, Health care, Insurance fund.

Who manages this Scheme?

This Scheme is administered by the Employee State Insurance Corporation, a comment body controlled by the ESI act 1948. The ESI is one of the most significant integrated need based social insurance schemes for employees. It protects the employee’s in unfortunate events and uncertain times.

Who is covered under ESIESI contribution

All non-seasonal factories having more than ten employees are covered under ESI. And all the establishments that are covered under the factory act or shops or establishments are also eligible for ESI.

Wages as per ESI Act

The contribution made by the employee and the employer is made on basic wages paid to the employees.
Some of the inclusion and exclusions under this are as follows:-


Inclusions Exclusions
Basic Pay Entertainment Allowance
Dearness Allowance Retrenchment Compensation
City Compensatory Allowance Encashment of leave and gratuity
House Rent Allowance Deduction of health insurance
Incentives (including sales commission) Tax Deductions
Medical Allowance
Meal allowance
Any other special allowances
Attendance and Overtime Payments

Collection of Contribution

An employer is responsible for paying his contribution for each employee and deducting the employee’s contribution from the wages bill. They must pay these contributions to the Corporation at the specified rates within fifteen dates of the last day of the calendar month in which the aidings are due.

Contribution Period and Benefit PeriodESI contribution

The concept of contribution period protects the employee if their wages rise above the Rs. 21,000.

Let us continue with the above example, say Mr AHJD was receiving wages of Rs. 18,000 till June 2020, the wages increase to Rs. 22,000 from July 2020. The aiding period is 1 st April 2020 – 30th September 2020. Hence, the reduction will continue on the revised salary up to September, and he will be eligible for the advantage up to 30th June of the following year.

Similarly, say an employee Mr YUIO earns a wage of Rs. 20,000 till October 2020, and from next month he earns Rs. 23,000. The decrease must continue on the revised salary up to 31st March 2021, and he will be eligible for the bonus up to December 2021.

Name Salary Revision Contribution Period Benefit Period
Mr AHJD July 2020 1 st April 2020 – 30th September 2020 1st January to June 2021
Mr YUIO November 2020 1st October to 31st March 2021 1st July to 31st December

As a consequence, both the employee and the employer must contribute to ESI, and the benefits assist the employee in dire circumstances.


✅ How ESI contribution is calculated?

According to the most recent ESIC rules, employees have 0.75% deducted from their respective gross salaries, while employers contribute 3.25% of their gross pay to ESI.

✅ What is the ESI limit in salary?

Rs.21,000 is the limit in the salary under ESI.

✅ Who is not eligible for ESIC?

The ESIC scheme currently does not cover workers or employees earning more than Rs. Twenty-one thousand per month, and the maximum wage for persons with disabilities is Rs. 25,000 per month.