Employees' State Insurance ESI contribution & benefits

Employees' State Insurance (ESI) contribution and benefits

What is the ESI scheme?

The Employees' State Insurance (ESI) scheme is a social security program in India that provides financial and medical benefits to employees. It's like an insurance program you and your employer pay into, and if you face situations that prevent you from working, ESI helps you financially. It also covers medical care for you and your dependents.

Who is eligible for ESI?

The ESI Act applies to factories employing 10 or more people.
It also covers other establishments like shops, hotels, educational institutions, and more, but the minimum number of employees required for registration can vary depending on the state. 

You can find a detailed list of applicable establishments and the minimum employee requirement by state in the original explanation.

Minimum number of employees required for ESI scheme

How much does ESI cost?

ESI is a contributory scheme, meaning both employers and employees pay a portion of the cost. The current contribution rate is 4% of the employee's gross monthly wage, split as:

Employer contribution: 3.25% of wages

Employee contribution: 0.75% of wages

There's a special case for employees earning less than ₹21,000 per month. The employer pays the entire contribution for these employees.

What benefits does ESI offer?

ESI offers a variety of cash and non-cash benefits to insured employees:

Cash Benefits:

Sickness benefit: 70% of your average daily wages for up to 91 days if you're unable to work due to illness.

Extended sickness benefit: 80% of your average daily wages for up to 309 days for specific long-term illnesses.

Enhanced sickness benefit: 100% of your average daily wages for up to 7 days (vasectomy) or 14 days (tubectomy) to promote family planning.

Disablement benefit: Depending on the severity, either 90% of your wages until recovery (temporary disablement) or a percentage based on earning capacity loss (permanent disablement).

Dependents benefit: A monthly pension for dependents of deceased employees due to work injury or illness (amount divided among dependents).

Maternity benefit: 100% of your average daily wages for 26 weeks (confinement), 6 weeks (miscarriage), or 12 weeks (adoption/surrogacy).

Confinement expenses: A lump sum of ₹2,500 for childbirth-related expenses.

Funeral expenses: ₹10,000 lump sum to the eldest surviving family member upon the employee's death.

Rehabilitation allowance: 100% of your average daily wages until you're admitted for fixing/replacing artificial limbs due to a work injury.

Unemployment allowance: 50% of your average daily wages for the first year and 40% for the second year if you lose your job due to specific reasons (eligibility criteria apply).

Non-Cash Benefits:

Medical care: Free medical care for you and your dependents at ESI hospitals and clinics.

How does the ESI scheme work?

The ESI scheme is self-financing, meaning the contributions collected from employers and employees are used to fund the benefits. The financial year is divided into two contribution periods: April-September and October-March.

Here's a step-by-step breakdown of how it works:

1. Employer Registration: Companies that meet the eligibility criteria (number of employees and industry type) need to register under the ESI Act within 15 days.

2. Employee Coverage: Once registered, the employer needs to declare all eligible employees under the ESI scheme.

3. Contribution Collection: Every month, the employer deducts the employee's contribution from their wages and adds their own contribution to create a combined amount.

4. Contribution Deposit: By the 15th of every month, the employer deposits the total contribution (employer + employee) into a bank authorized by the ESI corporation.

5. Benefit Claims: When an insured employee needs to claim a benefit (e.g., sickness leave, maternity leave), they can file an application with the employer. The employer will then forward the application to the ESI authorities for processing and disbursement of benefits.

6. Record Keeping: Employers are responsible for maintaining all employee and contribution records and submitting them for verification when required. They also need to inform the ESI authorities about any changes in the organization, like employee count or business address.

Employer Responsibilities

Apart from contributing financially, employers have other responsibilities under the ESI Act:

Timely registration under the ESI Act

Covering all eligible employees

Collecting and depositing employee and employer contributions on time