Employee State Insurance (ESI) - Ultimate Guide Updated for 2022

Employee State Insurance (ESI) - Ultimate Guide Updated for 2022

Deskera Content Team
Deskera Content Team
Table of Contents
Table of Contents

If you are running a startup, business, or company, you need to care for your employees. To ensure that every employer considers this, India introduced Employees State Insurance Scheme(ESI) as the essential payroll compliance to be fulfilled by every organization.

The ESI scheme empowers to cover health and wellness issues of the employees working under the organization. With this, employees of eligible organizations are protected against any kind of financial distress that may arise due to sickness, tragedy, disablement, or death occurring because of employment injury.

In this article, we will provide the ultimate guide of Employee State Insurance (ESI) Scheme covering the following:

• What is an Employee State Insurance (ESI) Scheme?

• Who is eligible for the ESI Scheme?

• What is covered under the ESI Scheme?

• Key features and benefits of ESI Scheme

• When is ESI Registration required?

• Documents necessary for the ESI Registration process

• Procedure for ESI Registration

• Procedure for filing ESI Returns

• How to obtain an ESI Card?

• FAQs about ESI Scheme

What is an Employee State Insurance (ESI) Scheme?

Employee State Insurance Scheme is a cover meant for the workers and employees to ensure and protect them with medical care.

In simple words, it is a self-financed and social security scheme introduced by the Government to safeguard employees covered under the ESI act.

Talking about a brief history, The ESI Act was first passed in 1948, and later was amended in 1975, 1984, 1989, and 2010 and is regarded as a critical measure enhancing social security and health insurance in the country. The Parliament of India notified the Act.

ESI offers various cash and medical benefits to industrial employees and workers in case of sickness, maternity, or employment injury. The scheme also covers pension to the family members in case of death or injury of the insured person.

Just like Provident Fund, Professional Tax, and TDS are part of necessary compliance, ESI is also one of the vital payroll compliances that an organization must fulfill in India.

Who is eligible for the ESI Scheme?

The provisions of ESI scheme covers the essential benefits to workers and employees extended to the following classes of establishments and sector such as:

  1. Hotels and restaurants
  2. Cinemas and theatres
  3. Road-motor transport establishment
  4. Newspapers establishment, editing and publishing house
  5. Organizations employing ten or more persons
  6. Educational and medical institutions

Apart from that, the ESI scheme benefits the workers and their dependents if any unfortunate event occurs at work.

Under the ESI Act, employees and the workers who come under the above classes and earn wages up to INR 21,000 per month are entitled to the social security scheme.

As far as the employer aspect is concerned, then the scheme is eligible and applicable to:

  1. Organization stretched out in India and came under Factories Act or the Shops and Establishment Act and employs more than ten workers.
  2. The employer must cover employees' insurance within the threshold reach of wages.
  3. If the company is registered under the ESI Act, the organization must rework over the CTC of employees who have a monthly gross salary of INR 21000 or less.
  4. If the company is not registered under the ESI Act, it should have an employee base of more than 20 to get itself registered under the act.

What is covered under the ESI Scheme?

The ESI scheme covers complete security to the employees and families in packages providing medical and financial aid.

Following are the list of four items covered under the ESI scheme:

  1. Complete Medical Care
  2. Compensation due to loss of wages
  3. Family members Coverage
  4. Cash and Non-Cash Benefits Coverage

1. Complete Medical Care

Complete coverage of medical care and attention to the employees mentioned in the eligibility. During the time of incapacity of work, the scheme will restore the employee's health and working capacity.

2. Compensation due to loss of wages

If there is absenteeism from work due to illness, maternity or accidents, the employee will not be able to go to the office or factory, resulting in loss of wages. The scheme will provide complete financial assistance in compensation for the wage loss faced by the employee.

3. Family members Coverage

The ESI scheme also provides medical care to family members associated with the employee. As of 31st March 2019, the total number of best beneficiaries summed up to 13.32 crore

4. Cash and Non-Cash Benefits Coverage

In a broader sense, the benefits of ESI schemes can be categorized under cash benefits and non-cash benefits:

  • Cash benefits in the form of direct cash due to sickness disablement, maternity funeral expenses, rehabilitation allowance, vocational rehabilitation, and medical bonuses
  • Non-cash benefits in the form of insurance and medical care

Key Features and Benefits of ESI Scheme

ESI Scheme comes up with defining features for the employees and employers.

During employees' working days, they are also eligible to get all the benefits covered under the ESI scheme as a whole.

Key Features of ESI Scheme

The key features of the ESI scheme are discussed below:

  1. The scheme is based on self-financing and is contributory. The funds that come under the ESI scheme are built out of the contribution from the employees and the employers that are payable at a monthly fixed percentage concerning wages and salaries paid.
  2. The ESI contribution rates were reduced with effect from 1st July 2019. The comparison of current and reduced rates can be explained with the help of the following table:


Current Rate

Reduced Rate

Employer Share



Employee Share



  1. The employer contributes his share in favor of employees whose daily average wage is 137 rupees. The employees under this category are not eligible to pay for their contribution, and hence they are exempted from contribution.
  2. The employer is required to pay his contribution and the employee's contribution within 15 days from the last date of the calendar month. The payment mode is flexible, either online or through authorized public sector banks.

Key Benefits of ESI Scheme

The ESI scheme provides medical benefits and protects the insured and his family members by giving them a level of financial security during economic hardships during hospitalization, surgery, disablement, and injuries caused during employment.

The medical care is also extended to the retired and permanently disabled insured persons and their spouses on the annual premium payment amounting to rupees 120 only.

The primary aim of the scheme is to provide benefits to the employee and family members by protecting their fundamental right of dignity and self-respect, especially during times of unforeseen circumstances, and help them nullify the physical and financial distress caused due to contingencies.

There are an overall six social security benefits covered under ESI Scheme that are listed below:

  1. Medical benefits
  2. Maternity benefits
  3. Disability benefits
  4. Unemployment allowance
  5. Dependent's benefit
  6. Sickness benefit

1. Medical benefits

The ESI covers the insured person's complete medical care and family members from the day he enters under the insurable employment. It also covers individuals medical expenses by providing reasonable medical care and covers the overall cost for

  • System of treatment
  • Special consultation
  • In-Patient treatment
  • The scale of medical benefit
  • Benefits to retired IPs
  • Imagining services
  • Reimbursement
  • Domiciliary treatment
  • Administration of medical benefits

2. Maternity benefits

The ESI helps an employee to welcome their baby by showering happiness and several benefits. The maternity benefit is payable for 26 weeks that can be extended up to 1 month on medical advice. If there is a case for miscarriage, then the duration is for six weeks, and in case of adoption, 12 weeks of pay is provided to the employee

3. Disability benefits

If an employee is disabled, ESI ensures that the employee is paid monthly wages from the period of injury until he recovers from the same. If it's a permanent disablement, then the compensation is paid for the entire lifetime.

The disability benefits can be divided into two parts:

  • Temporary Disablement Benefit (TDB)
  • Permanent Disablement Benefit (PDB)
  • Temporary Disablement Benefit (TDB)

In the TDB case, the employee will be paid 90% of the wage against the injury as long as the disability continues. In the PDB case, the employee will be paid at the rate of 90 % of wages and will be covered under monthly payments depending upon the extent of loss as certified by Medical Board

4. Unemployment Allowance

Under Unemployment Allowance, the ESI provides a monthly cash allowance for a maximum period of 24 months. In this case, the employee is permanently incapable due to non-employment injury or may be due to involuntary loss of employment.

5. Dependent's Benefit (DB)

If the employee meets with ultimate death due to injury caused at the time of employment, then the ESI will pay at the rate of 90% of the wages in the form of monthly payment to the dependents of the deceased person. This benefit will help them overcome the financial burden and reduce their financial stress to some extent.

6. Sickness Benefit (SB)

The sickness benefit is in the form of cash compensation at 70% of the wages payable to the insured workers during sickness or medical leave. This compensation can be paid for a maximum period of 91 days in two successive benefit periods.

Accordingly, the insured workers should qualify for the sickness benefit and contribute for 78 days in 6 months.

The sickness benefits can be divided into two parts that are:

  • Extended Sickness Benefit(ESB)
  • Enhanced Sickness Benefit

The ESB is extendable up to two years in the case of 34 long-term diseases as prescribed under the scheme covering compensation at the rate of 80% of wages.

The Enhanced Sickness benefit equals the total wage payable to the insured person undergoing sterilization for 7 to 14 days, applicable for both male and female workers, respectively.

Other Benefits covered under   ESI

Other than the above significant benefits, the scheme also provides additional benefits to the insured workers that includes the following:

  1. Funeral expenses
  2. Confinement expenses
  3. Physical rehabilitation
  4. Vocational rehabilitation
  5. Old age medical care

1. Funeral expenses

A total amount of 15,000 is payable to the dependence of the person who performs the last rites of the deceased

2. Confinement expenses

If confinement occurs at a place where medical facilities under the ESI Scheme are not available, the insured woman on IP can get coverage of such expenses.

3. Physical rehabilitation

If there is a physical disability due to employment injury, the insured benefits for the same.

4. Vocational rehabilitation

If there is a permanently disabled person undergoing VR training at VRS, the insured benefits from the same.

5. Old age medical care

If the insured person is retiring to attain the superannuation age or if a person is required to leave the service, they can get the payment up to Rs. 120 per annum.

All of the points mentioned above cover the benefits of the ESI scheme.

When is ESI Registration required?

The ESI registration is mandatory once a company or any entity employs ten or more employees in their organization. All the significant establishments, factories, and units are made compulsory to apply for the ESI registration within 15 days under the ESI Act 1948. The registration process can be carried out online following specific steps and documents discussed in the latter part of the article.

Documents necessary for the ESI Registration process

The registration process may sound challenging at first, but it is straightforward. You just need to have the necessary documents that are required to be submitted during the registration process.

The following are the list of documents required while filling the online registration form:

  1. A registration certificate obtained either under the Factories Act or the Shops and Establishment Act.
  2. Certificate of Registration, Memorandum of Association & Article of Association in case of a company or LLP and Partnership deed in case of a partnership
  3. Complete list of employees with current compensation working in an establishment
  4. The PAN card of the business entity, as well as working under the same
  5. Complete list of directors of the company
  6. Complete list of the shareholders of the company
  7. Bank statement of the organization, with evidence of commencement of operation
  8. Adjuster containing attendance of employees

Procedure for ESI Registration

Earlier, the company needed to complete the registration process because the central system was manual. But now, the process has been completely changed and has turned online.

Following are the five steps involved in the ESI Registration:

  1. Check and login to the ESIC portal
  2. Confirm the mail
  3. Fill the Employer Registration form
  4. Complete the Payment for Registration
  5. Receive the Registration Letter

Check and login to ESIC Portal

  • The first step is to register on the ESIC portal. The employer just needs to click the 'Sign Up' button under the 'Employer Login' option on the home screen.
  • After you are done, the employers need to fill in the details and submit the form.

Confirm the mail

  • After you have submitted the details, you will receive a confirmation mail sent to your registered mail ID and mobile number that you have entered at the time of sign up.
  • The email will contain the username and password details that you used for the registration as an employer.

Fill the Employer Registration form.

  • After confirming the mail, the next step is to log in to the ESIC portal again. It will redirect you to the page mentioned as 'New Employer Registration.'
  • The next step is to click on the New Employee Registration and carry out the further steps. You will be provided with an Employer Registration- Form 1, and you need to fill in the details.
  • The Employer Registration- Form 1 contains details related to the unit, details of the employer, and the number of employees working under it. Fill it carefully and then submit it.

Complete the Payment for Registration

  • After completing and submitting the form, you will be directed to the 'Payment of Advance Contribution' page. The employer needs to fill the amount and pay as per the selected payment mode.
  • The employer is required to complete the payment in advance for six months.

Receive the Registration Letter

  • You are just an inch left towards completing or registration process. After the successful payment of 6 months advance contribution, the system will generate registration letters known as (C-11) containing a 17 digit Registration Number provided by the ESIC department.
  • The registration letter acts as a valid proof of registration of the employer.

And you are done with successfully registering yourself as an employer and ready to benefit your employees.

Procedure for filing ESI Returns

After getting to know about the ESI registration process, employers need to file the ESI return twice a year.

The documents required at the time of filing of returns are:

  1. All the primary documents needed for the time of the registration process
  2. Register of attendance of employees
  3. Register of wages
  4. Form 6- Register
  5. Record of any accident happened inside the premises of the business
  6. Monthly returns and challans

How to obtain an ESI Card?

Employers registered under the ESI scheme provide their workers with magnetic, intelligent identity cards known as Pehchan cards or ESI cards. The ESI card contains the details of the employee, including name, father's name, address, and insurance number. The employee needs to produce the card for availing the benefits from hospitals and dispensaries coming under the ESI network.

Employees are given two sets of cards, one for them and another for the dependents.

As far as the application part is concerned, the procedure is straightforward.

This can be explained with the help of the following points:

  1. Download the Pahchan or ESI application form from the ESIC portal
  2. Submit a family photograph containing the photos of dependents of the employee
  3. After the submission, take out the form and go to the nearest ESIC office, where the photograph and fingerprints of employees and dependents will be captured.
  4. Within 30 days, two cards will be sent to the insured person via courier, or they might need to visit the nearest ESIC branch to collect the cards.

Frequently Asked Questions (FAQs) about ESI Scheme

After the complete and detailed guide ESI scheme, let's take a look at the FAQs about ESI Scheme:

Q1. How does the ESI scheme help the employees?

Answer: The ESI scheme provides complete medical care to the employee insured under the scheme. It offers financial assistance to compensate for the loss of the wages/ salary occurring during the period of absenteeism, incapacity, sickness, or employment injury.

Q2. Who administers the ESI scheme?

Answer: The scheme is administered by a corporate body known as Employee State Insurance Corporation (ESIC). The composition includes members representing Employers, Employees, The Central Government, State Government, the Medical profession, and the Parliament. The Director-General is the head of the Corporation.

Q3. If the wages of an employee exceed the limit of Rs. 21000 in a month, will they be treated under the scheme?

Answer: If the wages of an employee exceeds the wage limit as prescribed by the Central Government, then he continues to be an employee till the end of the contribution period, and hence, his contribution will be deducted and paid on the total wages earned by him.

Q4. Does the insured person need to complete registration?

Answer: Yes, there is a separate process to complete the registration of the insured person. The procedure is essential because they will be the only ones provided with the benefits coming under the act. So their identification is a must.

Q5. Can an employee get medical benefits even if he is shifting to another city for a temporary period?

Answer: Yes, with the help of an ESIC card or Pehchan card, employees can get access to medical benefits across the country coming under the scheme.

Q6. As an insured person, can I transfer the benefit grants?

Answer: No, the right to receive the benefit under the act is not transferable at any cost.

Q7. Is the overtime done by the employee included under the wage ceiling limit?

Answer: No, the overtime remuneration and bonuses are not included while calculating the weight ceiling limit for the coverage. As the overtime remuneration and bonuses are not done regularly, it is not included under the same.

Q8. What is the time limit for the payment of contributions to employees?

Answer: The prescribed time limit for the payment of contribution to employees is 21 days into the banks authorized by the Corporation.

Q9. Is there any interest charged on the delayed payment?

Answer: Yes, if the employer doesn't contribute within the time limit, they will be liable to pay simple interest at the rate of 12% per annum on each day of the default.

Q10. What are the records that are to be maintained for the ESI scheme by the employer?

Answer: The employer is required to maintain the following records for the ESI:

  • The wage record
  • Books of accounts
  • The Accident register as per Form-11
  • Employees deployed to the principal employer
  • An inspection book
  • Employees maintenance register

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Once all the employees submit the IT Declarations, the employers can view the status of these submissions. Besides payroll management, Employee Provident Fund (EPF), ESI and EPS contributions can also be auto-calculated and viewed.

Key Takeaways

And here we are at the end of the article covering A to Z about the ESI scheme. The scheme certainly fulfills the aim to provide health and wellness to workers' by providing numerous benefits and access to facilities across the country.

Let's take a look at the key takeaways of the article:

  • The ESI scheme is a cover meant for the workers and employees to ensure and protect them with medical care.
  • The sectors eligible for the scheme include hotels and restaurants, cinemas and theatres, transport, newspapers, and educational institutions employing ten or more persons.
  • The organization coming under the scheme should come under the Factories Act or Shops and Establishment Act.
  • The ESI scheme covers a list of items that includes complete medical care, compensation for loss of wages, family members coverage, and cash and non-cash benefit coverage.
  • The detailed key features of the ESI scheme
  • The current rate of employer share concerning the contribution is 3.25%, and employee share is 0.75%
  • The ESI covers six social security benefits: medical, maternity, disability, dependents, sickness benefit, and unemployment allowance.
  • The other significant benefits include funeral expenses, confinement expenses, physical rehabilitation, vocational rehabilitation, and old-age medical care.
  • The employer must register under ESI once the entity employs ten or more than ten employees in the organization.
  • There is a list of 8 documents necessary during the time of the registration process.
  • The procedure of ESI registration is divided into five steps- From check-in and login to receiving the final registration letter.
  • The employer is required to file the ESI return twice a year.
  • The ESI card is also known as the 'Pehchan card' provided to the worker to avail the benefits

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