ESI Contribution Guide for Employers: 0.75% + 3.25%, ₹21,000 Limit and Contribution Periods
How ESI works for Indian employers: who is covered, the 0.75% and 3.25% rates, the ₹21,000 wage limit, contribution periods, the new wage definition and how to calculate it each month.
pagar karo Payroll Desk· Published 10 Oct 2026· Updated 28 Oct 2026· 3 min readEmployees whose gross monthly wages are ₹21,000 or less (₹25,000 for persons with disability) are covered by ESI. The employee pays 0.75% and the employer 3.25% of ESI wages, due by the 15th of the following month. An employee covered at the start of a contribution period (April–September or October–March) keeps contributing until that period ends, even after a raise.
- Rates: employee 0.75%, employer 3.25% — total 4% of ESI wages.
- Coverage: gross wages up to ₹21,000 a month (₹25,000 for persons with disability).
- Two contribution periods a year; coverage at the start of a period continues to its end.
- From 21 November 2025 ESI wages follow the Code on Social Security definition, including the 50% add-back.
What ESI is
The Employees’ State Insurance scheme, run by ESIC, gives covered employees and their families medical care and cash benefits for sickness, maternity, disablement and death due to employment injury. It is funded by a small monthly contribution from employer and employee.
Who is covered
- Establishments: generally those with 10 or more employees in areas where the scheme is implemented.
- Employees: gross monthly wages of ₹21,000 or less (₹25,000 for persons with disability).
ESI rates
| Share | Rate | Example on ₹18,000 |
|---|---|---|
| Employee | 0.75% | ₹135 |
| Employer | 3.25% | ₹585 |
| Total | 4% | ₹720 |
ESIC practice is to round contributions up to the next rupee.
Contribution periods — the rule people miss
ESI runs in two six-month contribution periods: 1 April–30 September and 1 October–31 March. Coverage is checked at the start of each period:
- Covered on 1 April with wages ₹20,000, raised to ₹23,000 in June → keeps contributing until 30 September.
- From 1 October, wages are above the limit → no longer covered.
Payroll that simply checks “gross ≤ ₹21,000 this month” gets this wrong. pagar karo tracks each person’s coverage per period.
ESI wages under the Labour Codes
The Code on Social Security, 2020 came into force on 21 November 2025, and ESIC asked employers to compute contributions on wages as defined in the Code. The same 50% rule as PF applies: if excluded payments exceed half of total remuneration, the excess is added to wages for ESI.
Monthly steps
- Process payroll and compute ESI wages for covered staff.
- File the monthly contribution on the ESIC portal and pay by the 15th of the following month.
- Register new joiners on the portal so they get their ESI number and e-Pehchan card.
- Keep the challan and the ESI register for inspections.
ESI in pagar karo
- Coverage decided per contribution period, not just per month.
- Per-staff exemption flags (e.g. persons with disability threshold, low-wage exemption).
- ESI register, ESI return data and challan records with due-date reminders.
Frequently asked questions
Is ESI applicable on overtime?
Overtime is generally excluded from “wages” in the Code definition, but it counts towards the 50% add-back test and ESIC has historically treated regular overtime as wages. Check your situation with your CA.
What happens if an employee’s salary goes above ₹21,000 mid-period?
They continue to contribute until the end of the current contribution period and leave coverage from the next one.
Do low-wage employees pay ESI?
Employees whose average daily wage is up to ₹176 are exempt from the employee share; the employer still pays 3.25%.
This guide is general information for employers in India, checked against the sources above on 28 Oct 2026. Rules and rates change — confirm with your CA or the official notification before acting.