ESI compliance comes down to three things once your establishment is covered. You register with the Employees' State Insurance Corporation (ESIC), you deduct and pay contributions every month, and you keep records showing that every eligible employee is insured. This guide explains who has to register, the registration steps, contribution rates, due dates and what late payment costs. One recent change to keep in mind: since 21 November 2025, ESI runs under the Code on Social Security, 2020.
What is ESI?
ESI is a health and social security scheme run by ESIC. An insured employee and their family get medical treatment through ESIC. The employee also gets cash benefits when sickness, maternity or disablement keeps them from working. Sickness benefit, for instance, pays 70% of average daily wages for up to 91 days in a year. If an employee dies because of an employment injury, the dependants receive a monthly pension.
Which establishments and employees are covered
The starting point is 10 employees. Under the Code on Social Security, 2020, ESI applies to every establishment in which ten or more persons are employed, other than a seasonal factory. That takes in shops, hotels, restaurants, cinemas, road transport undertakings, newspaper establishments, and private educational and medical institutions. It also applies to an establishment carrying on a hazardous or life-threatening occupation notified by the Central Government, even if only one employee works there.
Within a covered establishment, employees whose gross wages are up to ₹21,000 a month must be insured. For employees with a disability, the limit is ₹25,000 a month. An employee who crosses the wage limit during a contribution period stays covered until that period ends. Gross wages can never be below the applicable state-wise minimum wages.
How to do ESIC registration
- Apply online on the Shram Suvidha portal (shramsuvidha.gov.in), which uses one common registration form under the labour codes, or on the ESIC employer portal (esic.gov.in).
- Fill in the employer registration form with the establishment's name, PAN, address, nature of business, date on which it became covered and the number of employees.
- Receive the 17-digit employer code, which is used for all contributions and returns.
- Register each eligible employee to generate an insurance number (IP number) and share the e-Pehchan card so the employee and family can use ESIC dispensaries and hospitals.
- Add new joiners on the day they join, and update exits every month.
Registration is fully online. The form is signed digitally and asks you to upload documents for the establishment, including proof of identity and address of the employer. Keep these details ready as well: PAN of the establishment, full address of the premises, bank account details, nature of business and date of commencement, your shop and establishment registration or factory licence number, the type of entity (company, partnership or proprietorship) with names and addresses of directors, partners or the proprietor, your EPF code if you have one, and the number of employees with their wages.
ESIC contribution rates
| Contribution | Rate | Paid by |
|---|---|---|
| Employee share | 0.75% of gross wages | Deducted from salary |
| Employer share | 3.25% of gross wages | Employer |
| Total | 4% of gross wages |
There is one exception on the employee side. An employee whose average daily wage is ₹176 or less pays nothing, but you still pay the employer's 3.25%. These rates have been in place since 1 July 2019.
Due dates, contribution periods and returns
Pay each month's contribution online by the 15th of the next month, so contributions on September wages are due by 15 October. ESIC splits the year into two contribution periods, April to September and October to March. Each one feeds a benefit period that starts three months after it closes, which is why April to September contributions support benefits from January to June. The monthly contribution is filed on the ESIC portal along with the payment. Keep attendance, wage and accident records ready, because inspectors ask for them.
Penalties for late or missed ESI payment
A late payment costs more than the contribution itself. Under section 127 of the Code on Social Security, 2020, you pay simple interest at 12% a year from the due date until the day you pay. Under section 128, ESIC can also levy damages of up to the full amount in arrears, after giving you a chance to be heard. Interest and damages are separate charges.
Not paying at all can lead to prosecution under section 133. If you deducted the employee's share from wages and did not deposit it, the punishment is imprisonment of one to three years and a fine of ₹1,00,000. For other failures to pay contributions, it is imprisonment of two to six months and a fine of ₹50,000. Failing to file returns can attract a fine of up to ₹50,000. A repeat offence after a conviction is punished more heavily under section 134. A repeat failure to pay contributions carries imprisonment of two to three years and a fine of ₹3,00,000.
Common ESI compliance mistakes
- Registering new joiners late, which leaves them without cover when they need treatment.
- Calculating contributions on basic pay only, instead of gross wages as defined in the law.
- Missing the 15th of the month due date during payroll delays.
- Stopping contributions when an employee crosses ₹21,000 in the middle of a contribution period.
- Not keeping accident reports and attendance records ready for ESIC inspections.
- Tracking ESI but missing other state deductions such as the labour welfare fund.
How Digiliance helps
Digiliance handles ESIC registration, monthly contributions and filings as part of its payroll compliance services and registration and licensing services. The Digiliance software tracks ESI due dates and challans for every establishment.
FAQs on ESI compliance
Is ESIC registration mandatory?
Yes, for every establishment with 10 or more employees, other than a seasonal factory, and for any establishment with even one employee in a hazardous or life-threatening occupation notified by the Central Government. Registration should be completed as soon as the establishment becomes covered.
What is the ESIC contribution rate?
The employee pays 0.75% of gross wages and the employer pays 3.25%, a total of 4%. Employees earning an average of ₹176 a day or less do not pay their share.
What is the due date for ESI payment?
By the 15th of the following month. Contributions on August wages, for example, are due by 15 September.
What is the wage limit for ESI?
Employees earning up to ₹21,000 a month in gross wages are covered. For employees with a disability, the limit is ₹25,000.
