The Employees' State Insurance (ESI) scheme is a self-financing social security and health insurance programme for Indian workers. Registration is mandatory for any establishment employing 10 or more persons (20 in some state notifications) where employees earn up to ₹21,000/month (₹25,000 for persons with disabilities).
Who must register?
ESI applies to factories, shops, restaurants, motor transport undertakings, cinemas, newspaper establishments, private medical and educational institutions. The ₹21,000 wage ceiling applies per employee — so even a company of 50 employees where everyone earns above ₹21,000 still needs to register (but may have no contributions to make at that moment).
Contribution rates
- Employee: 0.75% of gross wages
- Employer: 3.25% of gross wages
- Total: 4.00% of gross wages
Contributions are calculated on gross wages — not basic — and include HRA, conveyance, overtime, etc. They do not include annual bonus, gratuity or retrenchment compensation.
Monthly filing and deposit
Employers must deposit ESI contributions by the 15th of the following month via the ESIC portal. A monthly return is filed simultaneously detailing employee-wise wages and contributions. Late deposits attract 12% annual interest plus damages up to 25% per annum.
IP number and employee onboarding
Every ESI-covered employee gets an Insurance Number (IP number) — permanent and portable across jobs. At onboarding, employers generate a temporary IP via the ESIC portal and issue a Pehchan Card for the employee and dependents. This unlocks access to ESI dispensaries, hospitals and cash benefits (sickness, maternity, disablement).
What ESI coverage includes
- Free medical treatment for employee and family at ESI dispensaries/hospitals
- Sickness benefit: 70% of wages for up to 91 days/year
- Maternity benefit: full wages for 26 weeks
- Disablement benefit: monthly pension for permanent disability
- Dependants' benefit on employment-related death
- Funeral expenses up to ₹15,000
Common employer mistakes
- Not registering because head-office has only 5 employees, while a branch or contractor has 10+.
- Excluding contract labour — ESI applies to all workers on premises, including those on contractor rolls.
- Using basic instead of gross for computation — leading to underpayment and damages.
- Missing the monthly deposit date (15th of next month).
- Not generating IP numbers for new hires during probation.
How Vergado automates ESI
Vergado checks every new hire against the ₹21,000 wage ceiling, generates an IP number via the ESIC portal, deducts contributions on gross wages, deposits contributions and files monthly returns — all automatically. If an employee's salary crosses the ceiling mid-contribution period, Vergado applies the EPFO rule of continuing contributions till the period end.
