Employees' State Insurance Corporation (ESIC)

What is Employees’ State Insurance Corporation (ESIC)?

Employees’ State Insurance Corporation (ESIC) is an autonomous body under the Ministry of Labour and Employment, Government of India, responsible for administering the Employees’ State Insurance (ESI) scheme. ESIC is the statutory authority that runs the scheme, while ESI itself is the underlying social security programme that provides socio-economic protection to employees.

The scheme protects employees by providing medical care and cash benefits for sickness, maternity, disablement, injury, and death, extending this cover to their immediate family members. Because ESI is a self-financing scheme, employees who make regular contributions from their wages become eligible to draw these benefits.

ESIC operates through a network of regional and sub-regional offices that manage employer registration, contribution collection, and access to medical benefits for insured employees across India.

The ESI Act, 1948

ESIC traces back to the Employees’ State Insurance Act, 1948, drafted after Professor B.P. Adarkar’s 1943 report on health insurance for industrial workers. The Act established ESIC and, over time, extended its coverage from factory workers to all establishments the Act applies to.

Who is eligible for ESI?

Employees earning up to Rs.21,000 a month are eligible for ESI cover, while those earning more fall outside the scheme’s wage ceiling. For employees with disabilities, this ceiling is raised to Rs.25,000. Workers whose daily wage is below Rs.137 are exempt from making their own contribution, though the employer’s share still applies.

Establishments covered by the ESI Act, including factories and other notified establishments such as shops, hotels, and educational institutions, must register with ESIC once they employ more than 10 workers, or 20 in states such as Maharashtra and Chandigarh, and enroll every eligible employee. Establishments below this threshold, or employing only staff who earn above the wage ceilings, fall outside the scheme. The Central Government reviews these wage ceilings periodically, factoring in inflation and prevailing wage trends, so employers should confirm the applicable limit before determining who needs to be enrolled.

Since 21 November 2025, this Rs.21,000 threshold is assessed against the new wage definition under the Code on Social Security, 2020: if allowances exceed 50% of an employee’s total remuneration, the excess is added back to wages for this calculation. As a result, some employees with a higher CTC can still fall under ESIC coverage if their basic pay and dearness allowance make up less than half of their total pay.

ESIC contribution rates

ESIC contribution is calculated on an employee’s gross wages, meaning basic pay plus most allowances, rather than gross salary or full CTC. Since July 2019, employees contribute 0.75% of wages and employers contribute 3.25%, together making up the scheme’s 4% funding. These rates are fixed by the Central Government and reviewed periodically; the current split has held steady since it replaced the earlier 1.75%/4.75% structure.

Employers deduct the employee’s share from wages every pay cycle and remit both contributions to ESIC within the prescribed timeline. Missing this deadline can attract interest and penalties, so payroll teams typically align contribution remittance with their regular pay run.

What are the benefits of ESI?

Employees’ State Insurance offers six statutory benefits under Section 46 of the ESI Act to employees who are enrolled with ESIC and make regular contributions:

Medical benefit

Medical benefit covers the insured employee with no limit on treatment expenditure and extends the same cover to their immediate family. Retired employees and those with permanent disabilities can continue this coverage for an annual premium of Rs.120.

Sickness benefit

Sickness benefit pays 70% of a worker’s wages for up to 91 days a year, provided the employee has contributed for at least 78 days in the relevant contribution period. It extends to 2 years at 80% of wages for 38 identified long-term diseases, and rises to 100% of wages for sterilisation leave, up to 7 days for vasectomy or 14 days for tubectomy.

Maternity benefit

Maternity benefit is paid at full wages for 26 weeks of pregnancy, extendable by a month, provided the employee has contributed for at least 70 days in the relevant period.

Disablement benefit

Temporary disablement is compensated monthly at 90% of wages for as long as the injury lasts, and employees can claim it even without having made contributions. Permanent disablement compensation is instead fixed by ESIC’s Medical Board based on the extent of the injury or disability.

Dependents’ benefit

Dependents’ benefit compensates the family of an employee who dies due to an employment injury or occupational hazard.

Funeral expenses

Funeral expenses of Rs.15,000 are paid to the deceased employee’s dependents, or to whoever performs the last rites.

What is the ESI card (Pehchan card)?

The ESI card, also known as the Pehchan card, is the health card issued to every insured employee, allowing them to claim benefits at ESI network hospitals. Insured employees receive two cards, one for themselves and one for their dependents, and both are secured with biometric authentication. The card carries the employee’s name, photograph, address, and other registration details, along with a 10-digit Employee Insurance Number, whose first two digits denote the region and remaining eight identify the employee. Employers generate this number through the ESIC portal once registration is complete, and a physical copy of the card is required to access medical care at network hospitals.

Frequently asked questions

Is ESIC compulsory for all employees?

Yes. Once an establishment crosses the applicable employee threshold, 10 workers in most states and 20 in a few others, ESIC registration becomes compulsory, and every employee earning up to Rs.21,000 a month must be enrolled.

Which establishments must register under ESI?

Besides factories, the scheme applies to shops, hotels and restaurants engaged in sales, cinemas, road motor transport undertakings, non-factory newspaper establishments, and private educational and medical institutions that meet the employee threshold.

What is the current ESI wage limit?

The standard wage ceiling for ESI coverage is Rs.21,000 a month, raised to Rs.25,000 for employees with disabilities. Employees earning above these limits fall outside the scheme.

Which allowances are exempt from ESIC?

Conveyance allowance is exempt, since the government has held that it does not fall under the definition of wages for ESI purposes and is meant only to offset an employee’s commuting costs.