ESIC and its applicability

By Mayashree Acharya


Updated on: Jun 19th, 2024


4 min read

Employees’ State Insurance Corporation (“ESIC”) is a statutory corporate body set up under the ESI Act 1948, which is responsible for the administration of the ESI Scheme

The ESI scheme is a self-financed comprehensive social security scheme devised to protect the employees covered under the scheme against financial distress arising out of events of sickness, disablement or death due to employment injuries. 

The ESIC has its headquarters in New Delhi, besides 24 regional offices, 39 sub-regional offices located in various states and 650 branch located offices throughout the country, to support the implementation of the ESI scheme. In addition, the Medical Benefit Council, a specialised body, is constituted to advise the ESIC on the administration of medical benefits.

Latest Update

E.S.I.C. contribution rates are reduced W.E.F. 1st July 2019.

Composition of ESIC

The Union Minister of Labour heads the ESIC as its Chairman. The Central Government appoints a Director General as the Chief Executive Officer of ESIC. The ESIC comprises members representing crucial interest groups, including employers, employees, the Central and State Governments, representatives of the Parliament and the medical profession. 

A Standing Committee is constituted from among the members of the ESIC, which acts as an executive body. The Standing Committee has the power to administer the affairs of the ESIC and perform functions of the ESIC under its overall control and superintendence. 

The Secretary, Ministry of Labour, is the Chairman of the Standing Committee. The Director General of the ESIC is also an ex-officio member of the Standing Committee. The other members of the Standing Committee are nominated and elected among the members of the ESIC. The nominated members include the following:

  • 3 members of the Central and State Governments 
  • 3 members representing employers and employees 
  • 1 member representing Parliament and the medical profession  

Applicability of the ESI Scheme

The ESI scheme is applicable to all factories and other establishments as defined in the ESI Act with 10 or more persons (20 or more in some states) employed in such establishments. However, only those employees are covered under the ESI scheme whose monthly wages do not exceed Rs.21,000 (Rs.25,000 in the case of a person with a disability). The applicability of the scheme is explained through a flow chart below:

The scheme under the ESI Act also applies to the following: 

  • Shops 
  • Restaurants 
  • Hotels 
  • Cinema theatres 
  • Road motor transport undertakings 
  • Newspaper establishments and undertakings 
  • Educational institutions
  • Medical institutions 
  • Contract and casual employees of Municipal Corporations or Municipal Bodies. 

It also applies to the following establishments under the Central Government employing 20 or more persons engaged in: 

  • Insurance business 
  • Non-Banking Financial Companies (NBFCs) 
  • Airport authorities 
  • Port trusts 
  • Warehousing establishments

Features of the ESI Scheme

  • Complete medical care and attention are provided by the scheme to the employees registered under the ESI Act, 1948 at the time of his incapacity, restoration of his health and working capacity.
  • During absenteeism from work due to illness, maternity or factories accidents which result in loss of wages complete financial assistance is provided to the employees to compensate for the wage loss.
  • The scheme provides medical care to family members also. As of 31 March 2022, the total number of beneficiaries covered under this scheme is 12.04 crore.
  • Broadly, the benefits under this scheme are categorized under two categories:
    • Cash benefits (which includes sickness, maternity, disablement - temporary and permanent, funeral expenses, rehabilitation allowance, vocational rehabilitation and medical bonus) and,
    • Non-cash benefits through medical care.
  • The scheme is self-financing and being contributory in nature. The funds under the ESI scheme are primarily built out of the contribution from the employees and employers payable monthly at a fixed percentage of wages paid.
  • Currently, the employee contribution rate is 0.75% of the wages and that of employers is 3.25% of the wages paid.
  • The employer makes the contribution from his own share in favour of those employees whose daily average wage is Rs 137 as these employees are exempted from his own contribution.
  • The employer is required to pay his contribution and deduct employees’ contribution from wages and deposit the same with ESIC within 15 days from the last day of the calendar month in which the contribution falls due. The payment can either be done online or through designated and authorized public sector banks.

ESIC Contribution Rates

ESIC contribution rates (Reduced w.e.f. 01/07/2019)
Current Rate 
(Rate before 01/07/2019)
Reduced Rate 
(Rate after 01/07/2019)
Employer Share4%3.25%
Employee Share1%0.75%

Get expert assistance for ESI Registration under our ESIC Registration plan.

Frequently Asked Questions

How does the ESI scheme help the employees?

The ESI scheme provides complete medical care to the employees registered with the ESIC during the period of his/her incapacity and working capacity. It also provides financial assistance to compensate for the loss of wages of the employee during the period of his/her abstention from work due to sickness, maternity and employment injury. The ESI scheme provides medical care to family members of the employee also. 

Who administers the ESI scheme?

The ESI scheme is administered by a statutory corporate body called the Employees’ State Insurance Corporation (ESIC), which has members representing employers, Central Government, employees, medical professions, state government, and the members of Parliament. The Union Minister of Labour is the Chariman of ESIC and the Director-General of the ESIC is the Chief Executive Officer of the ESIC. 

How is the ESI scheme funded?

The ESI scheme is a self-financing scheme. The ESI funds are primarily built from the monthly contributions of the employers and employees. The monthly contributions are made at a rate of a fixed percentage of wages paid. The state governments also bear 1/8th share of the cost of medical benefits. 

What are the establishments that are covered under the ESI scheme? 

The Central Government issued a notification that all factories where 10 or more persons are employed are covered under the ESI scheme mandatorily. The following establishments employing 10 or more persons are also mandatorily covered under the ESI scheme: 

  • Shops. 
  • Hotels or restaurants not having any manufacturing activity, but only engaged in ‘sales’.
  • Cinemas, including preview theatres.
  • Road motor transport establishments. 
  • Newspaper establishments. 
  • All private educational institutions and medical institutions. 

Who fixes the rate of contribution for the ESI scheme?

The Government of India revises and fixes the rate of contribution for the ESI scheme. The rates are revised from time to time. Currently, the government reduced the rate of contribution in June 2019, effective from 1st June 2019. At present, the employee’s contribution rate (w.e.f. 1.07.2019) is 0.75 % of the wages, and that of the employer’s is 3.25% of the wages paid/payable in respect of the employees in every wage period. 

Is ESIC compulsory for all employees?

Yes. All the establishments covered under the ESI Act and all factories that employ more than 10 employees and pay wages below or upto Rs.21,000 per month (Rs.25,000 for employees with disability) must register with the ESIC and contribute towards the ESI scheme. All the employees earning more than Rs.21,000 per month are exempted from the ESI contribution. 

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice. It should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.

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