ESI Employer contribution, Employee contribution & ESIC applicability

The article is a complete guide about ESI employer contribution, ESI employee contribution, ESIC applicability, calculation & ESI benefits.

Let us start with overview of ESI.

What is ESI ?

ESI refers to Employees’ State insurance scheme of India.

Through contributions from employer and employee, ESI provides health insurance and social security to employees and their dependents.

ESI was introduced by the Act – Employees’ State Insurance Act, 1948. It provides benefits to employees in case of sickness, maternity, employment injury and some more cases.

The abbreviation ESIC stands for Employee State Insurance Corporation. It is a government run organization for smooth implementation of ESI Scheme. You can refer its official website here – https://www.esic.nic.in/

ESIC Applicability

ESI is applicable in the factories employing 10 or more persons.

ESIC applicability is also there for other establishments which have equal to or more than –

10 persons employed for the establishments in – Jharkhand, Kerala, Orissa, Pondicherry, Punjab, Rajasthan, Tripura, Delhi, Karnataka, West Bengal, Andhra Pradesh, Bihar, Chattisgarh, Gujarat, Haryana, Uttarakhand.

20 persons employed for the establishments in – Himachal Pradesh, Jammu & Kashmir, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tamilnadu, Uttar Pradesh, Arunachal Pradesh, Assam, Goa, Chandigarh, Daman & Diu, Dadra & Nagar Haveli, Andaman & Nicobar, Lakshadweep.

A factory or an establishment to which this Act applies shall continue to be governed by this Act even if the number of persons employed therein at any time falls below the limit specified i.e. 10 employees for the factory, 10/20 employees for the establishment.

Salary limit for ESIC applicability

For the factories or establishments where ESI is applicable, only those employees are covered in ESI who have a salary less than or equal to Rs. 21,000.

For eg. if there is an employee who has a salary of Rs. 19,000 then ESI will be applicable to him.

If the same employee has a salary of Rs. 21,500 then ESI will be not be applicable as the salary is higher than Rs. 21,000.

ESI Employer Contribution

For all the applicable employees, the employer has to contribute 3.25% of the salary for ESI.

For eg. if the employee has a gross salary of Rs. 20,000 then the ESI employer contribution will be 3.25 % of Rs. 20,000 i.e. Rs. 650.

Let us take another example – if an employee has a gross salary of Rs. 16,000 then the ESI employer contribution will be 3.25 % of Rs. 16,000 i.e. Rs. 520.

ESI Employee Contribution / ESI employee deduction

Each employee who is covered under ESI, has to contribute 0.75% of his gross salary, for ESI.

For eg. if the employee has a salary of Rs. 20,000 then the ESI employee contribution will be 0.75% of Rs. 20,000 i.e. Rs. 150.

Let us take another example of ESI employee contribution – if an employee has a gross salary of Rs. 16,000 then the ESI employee contribution will be 0.75 % of Rs. 16,000 i.e. Rs. 120.

This amount of ESI employee contribution is also ESI employee deduction or simply ESI deduction of the employee because this amount is deducted from the gross salary of the employee.

ESI Calculation

We have already seen above that ESI employer contribution rate is 3.25% of Gross salary and ESI employee contribution is 0.75% of gross salary. Following is another example of ESI Calculation –

ESI Calculation example

Gross Salary – Rs. 18,000

ESI employer contribution = 3.25% of Rs. 18,000 i.e. Rs. 585

ESI employee contribution = 0.75% of Rs. 18,000 i.e. Rs. 135

Benefits of ESI

Following is the brief about the benefits which insured person gets from ESI after certification of their medical condition by medical practitioner –

  • Periodical payments to any insured person after his sickness is certified by a duly appointed medical practitioner
  • Periodical payments to an insured woman in case of confinement or miscarriage or sickness due to pregnancy, confinement, premature birth of child or miscarriage
  • Periodical payments to the insured person suffering from disablement due to an employment injury sustained as an employee under the ESI Act
  • Periodical payments to the dependents of the insured person who died due to an employment injury sustained as an employee
  • Medical treatment of the insured persons
  • Funeral expenses to the family of died insured person or to the person who actually incurs the expense on the funeral

ESIC Act download link

Hope you are clear about ESIC applicability, ESI Employer contribution, ESI employee contribution and the calculation explained above.

You can download the ESIC act in the pdf format from the esic website – https://www.esic.nic.in/attachments/actfile/a4be21587177569bb213b8254b83148e.pdf

If you have any confusion regarding ESI calculation then you can write to us in the comments section below.

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