Quick answer: ESIC (Employees' State Insurance Corporation) runs India's ESI scheme, which gives medical care to employees and their families and cash benefits to employees during sickness, maternity, injury and unemployment. It applies to establishments with 10 or more employees and to employees whose wages are up to ₹21,000 a month (₹25,000 for persons with disability). The employee pays 0.75% and the employer 3.25% of wages, by the 15th of the next month.
For lower-paid employees, ESI usually sits next to PF on the payslip, and it is the deduction people understand least: who it covers, why it stops when pay rises, what it actually pays for, and whether the money ever comes back. This guide covers what ESI is, who must pay it, how much, every benefit with its official conditions, what employers must do, and what changes under the Code on Social Security. To work out the contribution on a salary, use the ESI calculator; for the wider payroll picture, see our guide to payroll in India.
What is ESI, and what is ESIC?
ESI stands for Employees' State Insurance, a compulsory social insurance scheme for lower-paid employees. ESIC, the Employees' State Insurance Corporation, is the body under the Ministry of Labour and Employment that runs it, through its own dispensaries, hospitals and branch offices. The two terms are used interchangeably on payslips.
The scheme was created by the ESI Act, 1948. Since 21 November 2025 it is governed by the Code on Social Security, 2020, which replaced the ESI Act. The old ESI rules and regulations were saved for one year from that date while new ones are prepared; our post on the 21 November 2026 transition explains what that means.
What does ESI mean in salary?
On a payslip, "ESI" or "ESIC" is the employee's 0.75% contribution deducted from pay. The employer adds its own 3.25% on top, which does not appear as a deduction but is usually shown as part of CTC. Together the 4% buys medical care for the employee and family, and cash benefits for the employee. Employees covered by the scheme are called insured persons.
Why is ESI deducted from salary?
ESI exists so that lower-paid employees, who are least able to buy health insurance or survive a loss of wages, get medical care and income support when they are ill, injured, pregnant or out of work. It works like insurance: everyone covered pays a small share of wages, the employer pays a larger share, and the pooled fund pays for treatment and cash benefits for whoever needs them. That is why the deduction is compulsory, why it is a percentage of wages rather than a fixed premium, and why it is not refunded.
Who is covered by ESI?
Establishments
ESI applies to factories and establishments employing 10 or more persons, including shops, hotels, restaurants, cinemas, transport undertakings, newspapers, and private educational and medical institutions. The Code on Social Security changed coverage in three ways, as the Labour Ministry summarised in its press release of 18 December 2025:
- Pan-India in principle: ESI is extended across India instead of only to notified areas. In practice, contributions and benefits still start in each district from a date the government notifies; for example, all 31 districts of Gujarat were brought in from 1 October 2026 (ESIC circular, as reported). Check your district on the ESIC website before concluding that ESI does not apply.
- Voluntary coverage: an establishment with fewer than 10 employees can join ESI voluntarily.
- Hazardous work: an establishment carrying on a hazardous or life-threatening process notified by the government is covered even if it employs a single person.
Employees
- Wage limit: employees whose wages are up to ₹21,000 a month must be covered; for persons with disability the limit is ₹25,000. The ₹21,000 limit continues under the Code; no increase has been notified.
- Low earners: an employee whose average daily wage is ₹176 or less does not pay the employee share; the employer still pays 3.25% (ESIC contribution rules).
- Mid-period rises: coverage is decided at the start of each contribution period (1 April and 1 October) or on joining. If wages rise above ₹21,000 during a period, ESI continues until that period ends.
- No opt-out: if the establishment is covered and the employee is within the limit, ESI is compulsory.
- Apprentices: apprentices with a contract registered under the Apprentices Act, 1961 are not "employees" under section 2(26) of the Code, so no ESI is deducted from their stipend.
There is no age limit, and contract, casual and fixed-term employees are covered on the same basis as permanent staff.
Is ESI tested on gross pay or on wages?
This is the question that decides coverage for many employees. Under the old ESI Act, ESI was worked out broadly on gross pay, including HRA. The Code on Social Security uses the Labour Codes' definition of wages: basic pay, dearness allowance and retaining allowance are in; HRA, conveyance, overtime, bonus, commission, employer PF and similar items are out, but if the excluded items exceed half of total pay, the excess is added back to wages. The Labour Ministry's view, set out in its FAQs on the Labour Codes, is that this definition applies to ESI from 21 November 2025. ESIC later clarified, on 18 December 2025, that its communication of 11 December 2025, issued during its SPREE registration drive, was for awareness, with compliance to follow once the rules and regulations are notified (SCC Online report), so some employers have moved to Labour Code wages while others still use gross pay until ESIC notifies its new regulations. The draft ESI (General) Regulations, 2026 were published in July 2026; they were not final at the time of writing.
The difference is large. Wages under the Labour Codes cannot be less than about half of total pay, so an employee on a much higher gross can still have ESI wages within ₹21,000. The table below tests coverage on Labour Code wages, which is the Labour Ministry's view:
| Monthly gross | Covered on gross pay? | Covered if wages are about 50% of gross? | Covered if wages are 75% of gross? |
|---|---|---|---|
| ₹18,000 | Yes | Yes (wages ₹9,000) | Yes (₹13,500) |
| ₹20,000 | Yes | Yes (₹10,000) | Yes (₹15,000) |
| ₹22,000 | No | Yes (₹11,000) | Yes (₹16,500) |
| ₹25,000 | No | Yes (₹12,500) | Yes (₹18,750) |
| ₹30,000 | No | Yes (₹15,000) | No (₹22,500) |
| ₹40,000 | No | Yes (₹20,000) | No (₹30,000) |
| ₹45,000 | No | No (₹22,500) | No (₹33,750) |
The 50% column is approximate, because the exact floor is half of total remuneration including employer PF. Your own payslip and ESIC contribution history show which basis your employer uses. Take a ₹26,000 gross as an example: on gross pay it is outside ESI, but if wages under the Labour Codes come to ₹13,000–₹19,500 it is inside, which is why two employers can treat the same salary differently today. Our guide to basic salary and wages explains what counts as wages.
ESI contribution rates and due date
| Item | Rule |
|---|---|
| Employee contribution | 0.75% of ESI wages |
| Employer contribution | 3.25% of ESI wages |
| Total | 4% of ESI wages |
| Rounding | Up to the next rupee |
| Contribution periods | 1 April – 30 September and 1 October – 31 March |
| Payment due date | 15th of the following month, online on the ESIC portal (March wages by 15 April) |
How much is ESIC on ₹20,000 of wages? The employee pays ₹150 (0.75%) and the employer ₹650 (3.25%), a total of ₹800 a month. The employee's ₹150 is deducted from salary; the employer's ₹650 is an extra cost included in CTC. On ₹10,000 of wages the split is ₹75 and ₹325; on ₹8,000 it is ₹60 and ₹260. Amounts with paise are rounded up to the next rupee, and if the average daily wage is ₹176 or less, the employee pays nothing and only the employer's 3.25% is due. The rates have been 0.75% and 3.25% since 1 July 2019. For other salaries, use the ESI calculator.
ESI benefits
The benefits, with the conditions set by ESIC, are below (ESIC benefits page):
| Benefit | What is paid | Main condition |
|---|---|---|
| Medical benefit | Full medical care for the insured person and family, with no ceiling on treatment cost | From the first day of insurable employment |
| Sickness benefit | 70% of wages for up to 91 days a year, usually after a 2-day waiting period | Contributions for 78 days in a 6-month contribution period |
| Extended sickness benefit | 80% of wages for up to 2 years | For 34 malignant and long-term diseases |
| Enhanced sickness benefit | Full wages for 7 days (vasectomy) or 14 days (tubectomy) | Sterilisation for family planning |
| Maternity benefit | Full wages for 26 weeks, extendable by 1 month on medical advice | Contributions for 70 days in the two preceding contribution periods |
| Temporary disablement | 90% of wages while the disability lasts | Employment injury; from day one, regardless of contributions paid |
| Permanent disablement | 90% of wages, monthly, by loss of earning capacity | Certified by a Medical Board |
| Dependants' benefit | 90% of wages, monthly, shared among dependants | Death from employment injury or occupational disease |
| Funeral expenses | ₹15,000 | From day one of insurable employment |
| Confinement expenses | Lump sum | Delivery where ESI medical facilities are not available |
| Unemployment allowance (ABVKY) | 50% of average daily earnings for up to 90 days of unemployment, once in a lifetime; scheme extended to 30 June 2027 | Insurable employment for at least 1 year and contributions for at least 78 days in the preceding contribution period; payable after 30 days of unemployment |
| Unemployment allowance (RGSKY) | 50% of wages for up to 2 years in a lifetime, with medical care | Insured for 2 years or more; unemployment due to closure of the factory, retrenchment, or permanent invalidity of at least 40% from a non-employment injury |
| Medical care after retirement | For the insured person and spouse | Retired and permanently disabled insured persons, for ₹120 a year, subject to ESIC's conditions |
ESI medical care has no sum-insured cap, unlike group mediclaim policies, but it is limited to the ESI network: ESI dispensaries and hospitals and the hospitals they refer patients to, not any hospital you choose. The ABVKY extension to 30 June 2027 was approved at ESIC's 198th meeting (report). For other ways to protect income after a job loss, see our guide to job loss cover in India.
Who counts as family and dependants?
The Code widened both terms. An ESIC circular of 28 November 2025 (N-11011/2/2025-BFT-II) told its offices to apply the new definitions: a widower and a grandparent can now be dependants for dependants' benefit, and a woman employee's father-in-law and mother-in-law are now "family" for medical benefit, subject to the conditions in the Code (IndiaLaw summary).
How to get ESI leave salary (sickness benefit)
ESI "leave salary" is the sickness benefit. If you are certified sick by an ESI medical officer, the certificate is your claim: submit it to your ESIC branch office, which pays 70% of your average daily wages into your bank account for the certified days on which you are not paid wages, usually after a 2-day waiting period. The days count towards the 91-day yearly limit, and you need contributions for 78 days in the related contribution period to qualify.
How long is ESIC valid?
ESI cover continues while contributions are paid. Each six-month contribution period has a matching benefit period that starts three months after it ends: January–June for April–September contributions, and July–December for October–March (ESIC contribution page). So cash benefits can continue for some months after you leave, depending on the contributions already made. Your e-Pehchan card and insurance number stay the same for life and are reused when you join another covered employer.
How to check your ESIC details
- Insurance number and e-Pehchan card: on your payslip or from your employer; the card can be downloaded from the ESIC insured person portal.
- Contribution history and entitlement: log in to the insured person portal with your insurance number to see the contributions paid each month and whether you are eligible for benefits.
- Mobile: ESIC services, including contribution and entitlement details, are also on the UMANG app.
To find your nearest ESI dispensary, hospital or branch office, use the locator on the ESIC website; your dispensary is chosen when you are registered and can be changed through your employer or the portal. If contributions are deducted from your salary but do not appear in the portal, raise it with your employer first, then with the ESIC branch office.
Employer duties under ESI
- Register the establishment on the ESIC portal once it reaches 10 employees (or earlier, for a notified hazardous process) in a district where ESI is in force.
- Register each employee from the day of joining, so that medical cover starts at once, and give them the insurance number.
- Deduct the employee's 0.75% from wages every month and add the employer's 3.25%.
- File the monthly contribution and pay online by the 15th of the following month.
- Keep records and file returns as required by the regulations in force; check the ESIC portal for changes after the 2026 regulations are notified.
- Report employment injuries to ESIC, so that disablement and dependants' benefits can be paid.
Late payment attracts simple interest at 12% a year (Gazette notification S.O. 2698(E) of 29 May 2026) as well as damages, and deducting the employee's share without depositing it can lead to prosecution. For how ESI fits with every other monthly deposit, see the due-date table in our payroll process guide.
ESI vs PF vs group health insurance
| ESI | PF | Group health insurance | |
|---|---|---|---|
| What it is | Social insurance: medical care and cash benefits | Retirement savings, pension and life cover | Employer-bought hospitalisation policy |
| Who pays | Employee 0.75%, employer 3.25% | Employee 12%, employer 12% | Usually the employer |
| Who is covered | ESI wages up to ₹21,000 | PF wages up to ₹25,000 (mandatory) | As per the policy |
| Money back? | No; benefits instead | Yes, with interest | No; claims only |
| Treatment limit | No sum-insured cap, within the ESI network | Not applicable | Sum insured |
Our EPF guide covers PF in the same detail.
What is changing for ESI in 2026
- New law: ESI moved from the ESI Act, 1948 to the Code on Social Security, 2020 on 21 November 2025.
- Wage basis: the Labour Ministry applies the Labour Codes' wage definition to ESI; the final position will follow ESIC's new regulations.
- New regulations: ESIC published draft ESI (General) Regulations, 2026 in July 2026 to replace the 1950 regulations; they were still in draft at the time of writing.
- Wage limit: the government discussed raising the limit from ₹21,000 to ₹30,000 at a meeting on 4 August 2026, but no increase has been notified, so ₹21,000 applies.
- Coverage: ESI is extended pan-India in principle, with voluntary coverage for establishments under 10 employees and mandatory coverage for single-employee hazardous establishments; districts continue to be brought in by notification, such as all of Gujarat from 1 October 2026.
- Family and dependants: widowers and grandparents can be dependants, and a woman employee's parents-in-law are family for medical benefit.
- Unemployment allowance: ABVKY extended to 30 June 2027.
- Interest: 12% simple interest on late dues under the Code, notified on 29 May 2026.
Related reading: ESI calculator · Social Security Code, 2020 guide · EPF guide · Gross vs net salary
Get ESI and every other deduction right. The Practical Payroll Management e-Book covers ESI, PF and all statutory deductions with worked examples.
Frequently asked questions
Can I get my ESI money back?
No. ESI is insurance, not savings, so contributions are not refunded or withdrawn when you leave a job. What you get instead is cover: medical care for you and your family, cash benefits during sickness, maternity and injury, and an unemployment allowance if you qualify.
Is ESIC applicable for a ₹25,000 salary?
It depends on how ESI wages are measured. On gross pay, ₹25,000 is above the ₹21,000 limit, so you are not covered. On wages as defined in the Labour Codes, which is the Labour Ministry's view, your ESI wages may be well below ₹21,000 if part of your pay is HRA or other excluded allowances, and then you are covered. Your payslip will show whether ESI is being deducted.
Can an employee opt out of ESI?
No. If the establishment is covered and the employee's wages are within the limit, ESI is compulsory for both the employer and the employee. There is no option to choose private insurance instead.
Does ESI cover my wife's pregnancy?
Your wife gets free medical care under ESI as a family member, including treatment during pregnancy at ESI facilities. The cash maternity benefit is paid only to insured women. If an insured man's wife gives birth where ESI medical facilities are not available, confinement expenses are payable.
Who is not eligible for ESI?
Employees whose ESI wages are above ₹21,000 a month at the start of a contribution period (₹25,000 for persons with disability), and apprentices with a contract registered under the Apprentices Act. Employees of an establishment with fewer than 10 employees are not covered unless the establishment joins voluntarily or carries on a hazardous process notified by the government, and ESI applies only from the date it is brought into force in the district where the establishment is located.
Is ESI the same as ESIC?
They refer to the same scheme. ESI is the Employees' State Insurance scheme; ESIC is the Employees' State Insurance Corporation, the body that runs it. Payslips and portals use the two terms interchangeably.
Position as of 14 November 2026. Based on the Code on Social Security, 2020, the ESI regulations saved by its transition clause, the Labour Ministry's FAQs, and ESIC's published benefit conditions. Testing ESI on Labour Code wages is the Labour Ministry's view; the final position will follow ESIC's new regulations. Implementation dates and some rules differ by district and state, so check your position. General information, not legal or tax advice.