ESI applies to employees whose gross 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 gross wages, 4% in all (rates w.e.f. 1 July 2019, esic.gov.in). On ₹18,000 that is ₹135 from the employee and ₹585 from the employer. Employees with a daily average wage of ₹176 or less pay nothing; the employer still pays its 3.25%.
Who is covered and on what wages
ESI applies in notified areas to establishments with 10 or more employees (20 in some States), and covers every employee whose wages are within the limit. The Labour Ministry's FAQs of 16 March 2026 confirm that the Code's definition of wages applies from 21 November 2025 and that the ₹21,000 limit continues until rules say otherwise.
Contributions are calculated on gross wages actually paid in the wage period, including overtime, not on CTC. Employer PF, ESI itself, gratuity and annual bonuses are not part of the ESI wage. Because the test is the actual wage, an employee with ₹20,500 fixed pay who earns ₹1,500 of overtime still contributes on ₹22,000 for that month if already covered.
The contribution-period rule
ESI runs in two six-month contribution periods: 1 April to 30 September and 1 October to 31 March. Coverage is tested at the start of a period. An employee covered on 1 April whose pay rises to ₹24,000 in June continues to contribute, on the actual ₹24,000, until 30 September, and leaves the scheme from 1 October. New joiners above the limit are not covered at all.
Raising someone's salary past ₹21,000 does not stop ESI deductions immediately. Payroll that stops them mid-period creates arrears and interest for the employer.
Worked examples
| Gross wages / month | Covered? | Employee 0.75% | Employer 3.25% | Total |
|---|---|---|---|---|
| ₹4,500 for 30 days (₹150 a day) | Yes | Nil (daily wage ≤ ₹176) | ₹147 (146.25 rounded up) | ₹147 |
| ₹18,000 | Yes | ₹135 | ₹585 | ₹720 |
| ₹18,500 | Yes | ₹139 (138.75 rounded up) | ₹602 (601.25 rounded up) | ₹741 |
| ₹21,000 | Yes (at the limit) | ₹158 (157.50 rounded up) | ₹683 (682.50 rounded up) | ₹841 |
| ₹23,000, new joiner | No | Nil | Nil | Nil |
| ₹23,000, person with disability | Yes (limit ₹25,000) | ₹173 | ₹748 | ₹921 |
For a 40-person unit where everyone earns ₹18,000, the employer's ESI cost is ₹23,400 a month (40 × ₹585) and ₹5,400 is deducted from employees. Contributions are paid by the 15th of the following month.
Automate it
FundRaksha HR calculates PF, ESI and PT for every employee automatically on each payroll run, so the challans, ECR and payslips agree without a spreadsheet. It applies the contribution-period rule for you, so a mid-year raise does not stop ESI early. Pair this with the PF calculator, and see the salary slip format for how ESI appears on a payslip.