Employees' State Insurance is a self financial contributory fund scheme intended to provide Social protection towards workers and their dependencies. ESI is one of the most popular integrated need-based social insurance schemes among employees. The scheme protects employee interest in uncertain events such as an injury during employment, temporary or permanent physical disability, sickness, maternity etc. The scheme provides both healthcare benefits and cash benefits.

Employees’ State Insurance Corporation(ESIC), a Government entity, manages, administers and regulates ESI scheme as per the rules mentioned in the Indian ESI Act of 1948.

ESI Scheme being contributory in nature, all employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Corporation in respect of an employee shall comprise of employer's contribution and employee's contribution at a specified rate. The rates are revised from time to time. Currently, the Employee's contribution rate is 0.75% of the wages, and that of an employer is 3.25% of the wages paid/payable in respect of the employees in every wage period. Employees in receipt of a daily average wage up to Rs.137/- are exempted from payment of contribution. (Employers will, however, contribute their own share in respect of these employees.)

Medical Benefits
An Insured Person (IP) under the scheme and/or a member of his family does not have the right to claim Medical Services over and above those which have been so prescribed.
The beneficiaries are entitled to reasonable medical, surgical and obstetric treatment.
To Insured Persons:
IPs are entitled to avail treatment in ESI Dispensary/Hospital/Diagnostic Centre and recognised institutions, to which he is attached such as:
- Outpatient treatment
- Domiciliary treatment by visits at their residences.
- Specialists Consultation.
- In-patient treatment(Hospitalisation)
- Free supply of drugs dressings and artificial limbs, aids and appliances.
- Imaging and laboratory services.
- Integrated family welfare, immunisation and MCH Programme and other national health programme etc.
- Ambulance service or re-imbursement of conveyance charges for going to hospitals, diagnostic centres etc.
- Medical Certification and
- Special provisions.

To Family Members of Insured Persons:
While in all implemented areas, IPs are entitled to medical care as detailed above, members of a family of an IP are entitled to one or other medical assistance under the following standards :
- Full Medical Care i.e, all facilities as for IPs including hospitalisation.
- Expanded Medical Care i.e, all facilities as for IPs except hospitalisation.
The ESIC aims at providing Medical care according to uniform standards to the family members in all implemented areas as the rates of the contribution paid by the employees and the employers are the same throughout the country.

Claims in private hospital
As mandated by the ESI Act, treatment has to be taken only from the ESIC hospitals or dispensaries. However, in case of emergency, if the treatment is taken from a private hospital, you can raise a claim with the ESIC (subject to ESIC's approval.)

Applicability to Entities & Employees
It applies to entities falling under Covered units. Covered units are:
All entities that are covered under Factory Act and Shops and Establishment Act
where ten or more people are employed (Irrespective of their monthly earnings.)
Note: Some states have upper limits on the number of employees for eligibility of the ESI scheme.
Applicability to Employees:
- All employees of a covered unit, whose monthly incomes (excluding overtime, bonus, leave encashment) does not exceed Rs.Twenty-one thousand per month, are eligible to avail benefits under the Scheme.
- Employees earning daily average wage up to Rs.One hundred seventy-six are exempted from ESIC contribution.
- However, employers will contribute their share for these employees.

Collection of Contribution
It is the employers responsibility to contribute to the ESI fund by deducting the employees’ contribution from wages and combining it with their own contribution.
An employer is expected to deposit the combined contributions within 15 days of the last day of the Calendar month.
i.e Contributions for the month of April to be deposited by 15th May.
The payments can be made online or to authorized branches of the State Bank of India or other designated banks.

Contribution Calculation
ESI is calculated as a percentage of Gross wages payable to employees.

Table 1

Particulars	Employee	Employer
Gross Pay	17000
Percentage of Gross Pay	0.75%	3.25%
Contribution	17000 * 0.75% = 127.5	17000 * 3.25% = 552.5
Total Contribution	127.5 + 552.5 = 680
Post ESI Salary/Wages in the hands of Employee	17000 - 127.5 = 16872.5

Example 1- Gross Pay is 21000

Particulars	Employee	Employer
Gross Pay	21000
Percentage of Gross Pay	0.75%	3.25%
Contribution	21000 * 0.75% = 157.5	21000 * 3.25% = 682.5
Total Contribution	157.5 + 682.5 = 840
Post ESI Salary/Wages in the hands of Employee	21000 - 157.5 = 20842.5

Example 2- Gross Pay is 25000

Particulars	Employee	Employer
Gross Pay	25000
Percentage of Gross Pay	0.75%	3.25%
Contribution	25000 * 0.75% = 187.5	25000 * 3.25% = 812.5
Total Contribution	Need not contribute as pay above 21000
Post ESI Salary/Wages in the hands of Employee	25000 - 0 = 25000

Example 3- Gross Pay is 21000 on 1st April. Hiked to 23000 from June.

Deposit into ESI will continue for the entire Contribution period. (i.e April to September)

However, it will be on actual pay received.

Particulars	Employee	Employer
Gross Pay	21000;23000
Percentage of Gross Pay	0.75%	3.25%
Contribution	(21000 * 0.75% * 2m) + (23000 * 0.75% * 4m) = 1005	(21000 * 3.25% * 2m) + (23000 * 3.25% * 4m) = 4355
Total Contribution	1005 + 4355 = 5360
Post ESI Salary/Wages in the hands of Employee	134000 - 5360 = 128640

Example 4 : Gross pay is 23000 on 1st April.
Since pay is above 21000 at the beginning of Contribution period, deposit into the fund is not needed.

Example 5 : Continuing Example 3, Gross pay is 23000 wef June.
Since pay is above 21000 as on October 1st, being the beginning of Contribution period (October-March), deposit into the fund is not needed.

Contribution Period and Benefit Period
Continuing the above discussion, we are clear what is to be done if Salary is 21000 or 25000 at the beginning of the Contribution period. However, what is to be done of the Salary changes during the Contribution period midway? Should the contributions immediately stop?
To handle this, ESI has a concept of Contribution Period during which the ESI contributions have to continue (even though the salary exceeds the maximum specified limit.)
There are two contribution periods of six months and two corresponding benefit periods of six months each.

Contribution Period	Cash Benefit Period
1st April to 30th September	1st January of the following year to 30th June
1st Oct to 31th March of the year following	1st July to 31th December

So, Contribution Period is the period during which deposits have to be made into the ESI fund, whereas Benefit Period is the period during which the employee will still be covered under ESI scheme and can avail its services/benefits.

Salary for ESI Calculation
ESI contributions (of both, employee and employer) are calculated on the Employee’s Gross monthly salary.
Here, Gross Salary is:
Basic pay
+ Dearness allowance
+ House Rent Allowance (HRA)
+ Incentives (including sales commissions)
+ City compensatory allowance
+ Meal allowance
+ Uniform allowance
+ Attendance & overtime payments
+ Any other special allowances.
But does not include Health insurance, Retrenchment compensation, Encashment of leave and gratuity, Annual bonus (Diwali bonus etc).