Employees' State Insurance(ESI)
Employees' State Insurance is India's contributory health and social-security scheme under the ESI Act, 1948, covering medical, sickness, and maternity benefits. It applies to employees earning up to a wage ceiling, with the employer contributing 3.25% and the employee 0.75% of gross wages.
ESI is a self-financed social-security and health-insurance scheme for Indian workers, run by the Employees' State Insurance Corporation (ESIC) under the Ministry of Labour and Employment. It covers medical care, cash benefits during sickness and maternity, and compensation for employment injury or disability, funded by employer and employee contributions rather than general taxation.
Coverage applies to employees earning 21,000 rupees or less per month in gross wages (25,000 rupees for persons with disabilities). The employer contributes 3.25% of gross wages and the employee 0.75%, a combined 4% rate that has held since the government reduced it from 6.5% in July 2019. Contributions are deposited by the 15th of the following month through ESIC's online portal.
Because ESI and EPF apply to overlapping but distinct wage bands and serve different purposes - health and social security versus retirement savings - most India payroll setups run both deductions in parallel. A worker whose wages later rise above 21,000 rupees stays covered under ESI for the remainder of the current contribution period.
References
- ESIC Contribution Rates — Employees' State Insurance Corporation (Ministry of Labour and Employment, Government of India)
- Government Reduces the Rate of ESI Contribution from 6.5% to 4% — Press Information Bureau, Government of India