ESI Calculation & eligibility applicability

ESI Calculation

ESI Calculation – Employees’ State Insurance is a social security programme that provides coverage for health-related issues for employees working in India. It is a self-financed insurance deposit that the workforce contributes to each month from their gross wage and is administered by ESIC under the ESI Act 1948.

Working professionals often wonder crucial things like what is the rate of ESI contribution, how to calculate ESI in the current fiscal year 2023–2024, what is the method to check the deduction, and many other things.

How To Calculate ESI?

Basic Pay, Dearness Allowance, City Compensatory Allowance, House Rent Allowance, Attendance & Overtime Pays, Meal Allowance, Uniform Allowance, Incentives, and Other Special Allowances are the components that make up an employee’s gross wage when calculating ESI.

Let’s use a straightforward example to further comprehend the idea.

If an employee’s gross salary is INR 15,000,
The proportion of the employee’s contribution would be: 0.75/100 * 15,000 = 112.5 INR.
Additionally, the Employer’s Contribution Share would be: 3.25/100 x 15,000 = 487.5
Consequently, 112.5 + 487.5 = 600 INR would be the total ESI contribution.

What is the eligibility and applicability for ESI contribution?

Organisations having a strength of 10 or more full-time employees are eligible to use ESI. Every working professional who makes less than INR 21,000 per month is required to register under this programme. The option to have the fund deducted or not is available to those who get monthly wages that are more than this amount.

Why do employees need ESI?

When unable to work, working professionals registered under the ESI Act, 1948 are provided with complete medical care. Financial aid is provided to offset the loss caused by employees missing time from work due to illness, pregnancy, disability, or workplace injuries. The programme also offers medical assistance to the enrolled employees’ families.

Every professional needs to be aware of employee perks in addition to ESI.

How to get an ESI card?

Registered employers have the ability to download and complete an ESI or penchant application form online through the government’s ESIC portal. The employee must subsequently take necessary action, such as affixing a family photo to the paperwork and properly attesting to it. The ESIC office issues an ESI card to the applicant/employee after doing the necessary verifications.

What is the penalty for late/non-payment of ESI?

A simple interest fee of 12% per year is imposed on the registered employer for each day that the ESI contribution is late. Non-payments, delays, and fraudulent ESI payment practises are also punishable by up to 2 years in prison and a fine of INR 5,000. ESI contributions deposited beyond the deadline are likewise prohibited by the ITA (Income Tax Act). Employers who make such contributions do not benefit from the tax deduction and must instead pay income on it.

How To Claim ESIC Benefit?

To file a claim for a sickness, temporary disability, or maternity benefit offered by the Employees’ State Insurance Corporation, Ministry of Labour and Employment, Government of India, one can obtain an ESIC Form-9.

As an ESI programme beneficiary, you are eligible to receive the following two categories of benefits:

Medical benefits: are available to the employee’s dependents as well. They must go to any of the hospitals with an ESI empanelled contract to receive this.
financial Benefits: Employees or workers who are ESI plan beneficiaries may get financial benefits in the event of sickness, disablement (temporary/permanent), maternity, unemployment, dependent, funeral expenses, or physical or vocational rehabilitation.

What Is The ESI Number?

After the employer submits the necessary information, one can obtain this number via the ESIC portal.

Can I Claim ESI In A Private Hospital?

Yes, you can apply for ESI at a private hospital. The ESI Act requires that only ESIC hospitals or dispensaries be used for treatment. However, in an emergency, if a private hospital is used for treatment, one may file a claim with the ESIC, subject to ESIC approval, and only then will the expenses be reimbursed.

In order to facilitate the claim process for the ESI amount, the ESIC has partnered with a number of hospitals across India that are listed on the ESIC online platform.

Consequences of Employee Contribution Non-Payment or Late Payment

  • The amount deducted from an employee’s pay is viewed as an employee contribution and belongs to the company. Because of this, it is the employer’s responsibility to make sure that the contribution is placed in salary with ESI.
  • Under the ESI Act, it is a misdemeanour to fail to pay or pay late employee contributions that were deducted from earnings.
  • The ESI Act makes non-payments, late payments, and faking payments punishable by up to two years in prison and a fine of Rs 5,000.

Click Here For More Information About Statutory Compliance in Payroll

Employees’ State Insurance (ESI) Scheme

With contributions from both the employee and the employer, the ESI is a contributory fund that enables Indian employees to take part in a self-financed healthcare insurance fund.

Employees’ State Insurance Corporation, a governmental organisation that serves as a self-financing social security and labour welfare organisation, is in charge of running the programme.

According to the guidelines outlined in the Indian ESI Act of 1948, the organisation manages and controls the ESI programme.

Among employees, ESI is one of the most well-liked integrated need-based social insurance programmes. The programme safeguards employee interests in the event of unforeseen circumstances, including sickness, maternity, temporary or permanent physical impairment, and workplace accidents. The programme offers both financial and medical benefits.

Eligibility for ESI

All types of establishments, including corporations, factories, restaurants, movie theatres, offices, and other institutions, are covered by the ESI scheme. These are referred to as Covered Units.

Salary for ESI Calculation

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).

FAQs on Employee State Insurance Scheme

Q2. What will happen if the employee doesn’t get paid on time or is paid later than expected?

Ans. According to the ESI Act, non-payment and late payments are offences that are punishable by up to two years in jail and a fine of Rs 5,000.  An employer will incur simple interest at a rate of 12% per year for each day of delay or failure to pay if they fail to make a contribution within the time frame specified in the rule.

Q2. What is the bare minimum of employees that an ESI Registration is necessary for?

Ans: In some states, ESI Registration requires a minimum of 10 employees and a maximum of 20 employees. The article linked above contains the entire list. Employers contribute 3.25% of the employee’s gross pay each month to ESI, while employees have 0.75% of their gross pay deducted each month.

Q3. Who qualifies for the ESI programme?

Answer: Employees who get a monthly salary of less than Rs. 21,000, excluding overtime, bonuses, and leave encashment, are subject to the ESI. It is Rs. 25000 in the case of a person with a disability.

Q4. What is the minimum age requirement to apply for ESI?

Ans: Applicants for ESI must be between the ages of 18 and 27.

Q5. What is the salary cap for ESI?

Answer: Employees who get a monthly salary of less than Rs 21,000, excluding overtime, bonuses, and leave encashment, are subject to the ESI. It is Rs. 25000 in the case of a person with a disability.


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