The Employees’ State Insurance (ESI) Scheme, governed by the Employees’ State Insurance Act, 1948, is one of the most beneficial social security legislations for workers in India. The scheme was enacted with the aim of protecting employees against sickness, disability, and other medical emergencies. The ESI scheme has evolved in structure and application, and today, it is also applicable to gig workers and platform workers. The scheme mandates that employers and employees contribute a certain percentage, and non-compliance with this is penalized in the ESI Act, 1948.
In this blog, we provide a detailed and up-to-date overview of the ESI Scheme as it currently stands to help employers and employees understand their rights and responsibilities.
What is the ESI Scheme?
The ESI Scheme is a government-supported social security programme established under the Employees’ State Insurance Act, 1948. It is administered and regulated by the Employees’ State Insurance Corporation (ESIC), which operates under the supervision of the Ministry of Labour and Employment, Government of India. It is designed to safeguard employees from financial distress in cases of illness, maternity, disability, or death due to employment-related injuries.
What is the ESI Act, 1948?
The Employees’ State Insurance Act, 1948, is the legislative framework under which the ESI Scheme is implemented. It provides the legal foundation for providing medical and financial benefits to workers. The Act mandates:
- Compulsory registration under the scheme of the eligible establishments
- Regular contributions by employers and employees
- Timely access to benefits for insured individuals
- Penalties for non-compliance and false declarations
The ESIC has the authority to frame rules, enforce provisions, and inspect establishments to ensure adherence to the law. The ESIC functions through regional and sub-regional offices located throughout the country.
Applicability of the ESI Scheme
As per the provisions of the ESI Act, 1948, the scheme is applicable to:
- Factories and Establishments: Non-seasonal factories using power and employing 10 or more persons.
- Other Establishments: Including shops, hotels, restaurants, cinemas, newspapers, educational and medical institutions, and private road transport services employing 10 or more persons.
Some states have voluntarily extended coverage to establishments with 20 or more employees.
- Wage Threshold: The scheme covers employees earning a monthly wage of up to ₹21,000. For persons with disabilities, the wage ceiling is extended to ₹25,000. This wage threshold is periodically evaluated to account for inflation and changes in the cost of living.
It is mandatory for eligible employers to register under ESIC and contribute to the scheme.
Contribution Rates
The ESI Scheme operates on a contribution model, where both the employer and employee contribute a fixed percentage of the employee’s gross monthly wages:
- Employer’s Contribution: 3.25% of the gross wages of the employee
- Employee’s Contribution: 0.75% of their gross wages
These contributions are deposited into the ESIC fund, which is then used to provide various benefits to insured persons. Employers must remit contributions within 15 days of the end of each calendar month.
Benefits Under the ESI Scheme
The ESI scheme provides numerous benefits to the employees, including:
1. Medical Benefit
- Medical care for insured employees and their dependents from day one of employment.
- Free outpatient consultations, medicines, diagnostics, and hospitalization in ESI hospitals.
- Super specialty treatment through empanelled private hospitals for critical cases.
2. Sickness Benefit
- Paid at the rate of 70% of average daily wages.
- Maximum duration: 91 days in two consecutive benefit periods.
- To qualify, the insured worker must have contributed for at least 78 days in a contribution period at a workplace.
3. Extended Sickness Benefit
- For certain long-term diseases like tuberculosis, cancer, etc.
- 80% of wages for up to 2 years, depending on the nature of the illness.
4. Maternity Benefit
- Full wage (100%) compensation for 26 weeks during maternity leave.
- Can be extended up to 30 weeks in case of complications or multiple births.
- Miscarriage and adoption leave benefits are also available.
5. Disablement Benefit
- Temporary Disablement: 90% of wages as long as the disability continues.
- Permanent Disability: Lifetime monthly payments based on the percentage of disability certified by the Medical Board.
6. Benefit of the Dependent
- In case of death due to employment injury, dependents receive monthly pensions.
- The amount is distributed among the widow, minor children, and parents of the employee.
7. Funeral Expenses
A one-time amount of ₹15,000 is payable to the family or nominee of the deceased insured person to cover funeral-related costs.
8. Rehabilitation and Vocational Training
Insured persons suffering from employment-related injuries or disabilities may receive training and rehabilitation services.
Recent Amendments and Updates (as of 2025)
The government introduced key amendments in 2024 to improve ESI coverage and streamline compliance:
- Threshold Amendment: The minimum turnover threshold for certain voluntary coverage establishments was revised from ₹5 crores to ₹25 crores.
- Gig and Platform Workers:
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- Efforts are underway to bring gig workers under the ESI scheme as part of the implementation of the Social Security Code, 2020.
- Although yet to be fully notified, the draft rules propose partial contributions from aggregators/platforms and the workers themselves.
- Introduction of Digital ESI Cards, which serve as Aadhaar for insured persons to access benefits pan-India.
ESI Registration Process Online
For Employers:
1. Online Registration:
- Visit esic.gov.in and click on ‘Sign Up’.
- Fill in basic establishment details to generate login credentials.
2. Filing Registration Form:
- Log in with the generated credentials.
- Complete Form-1 and upload relevant documents, including PAN, GST, address proof, and a list of employees.
3. ESIC Code Number:
- After verification, the system generates a unique 17-digit ESIC registration number.
4. Employee Enrolment:
- Employers must add new employee details within 10 days of joining.
For Employees:
- Upon registration, the employer issues a temporary identity card.
- After Aadhaar authentication, a permanent Pehchan Card is generated.
- This card allows access to medical and cash benefits across the ESIC network.
Compliance Requirements
Employers are required to:
- Maintain attendance and wage registers
- Submit monthly contribution returns
- File half-yearly and annual returns
- Report employment injuries within 24 hours
- Display notices about ESI benefits and contributions prominently at the workplace
Penalties Under the ESI Act, 1948
Section 85 of the ESI Act, 1948 provides penalties for default:
Failure to Pay Contributions:
- Imprisonment up to 3 years and/or fine up to ₹10,000
- For repeat offences, mandatory imprisonment of not less than 6 months
Delay in Contributions:
- Interest at 12% per annum on the delayed amount
- Damages up to 25% of the contribution amount, depending on the period of delay
False Returns or Reports filing:
Imprisonment up to 1 year and/or fine
Digital Transformation and E-Governance
To increase transparency, efficiency, and ease of access, the ESIC has adopted multiple digital measures, such as:
- ESIC Portal: Online services for ESI registration, contribution filing, and ESI return submissions.
- E-Pehchan Card: A smart card system to ensure the portability of benefits.
- Mobile App: Allows insured persons to track claims, check dispensaries, and lodge grievances.
- Integration with UAN and Aadhaar: Helps avoid duplication and ensures faster benefit disbursement.
Conclusion
The Employees’ State Insurance (ESI) Scheme is one of the most significant social security initiatives in India, protecting workers and their families against health-related and employment-linked risks. With a wide range of benefits, including medical care, disability, and maternity coverage, the scheme promotes worker welfare and financial resilience. For employers, compliance is both a legal duty and a social responsibility. Active participation in the ESI Scheme ensures dignity, stability, and well-being for the nation’s workforce.
