Rules of ESIC in 2026: Who Is Covered, What Is Deducted, Contribution Periods and Every Benefit

The Employees' State Insurance (ESI) scheme is the health and income-protection cover for India's lower-paid workers. It pays for treatment at ESIC hospitals and dispensaries and replaces part of a worker's wages during sickness, maternity, injury and job loss. The rules behind it moved into the Code on Social Security on 21 November 2025, and new central rules followed in May 2026. This guide is for employers, payroll teams and workers. It covers who is covered, what is deducted, how contribution and benefit periods work, every benefit with the amounts ESIC publishes, what employers must do — including reporting accidents — and the penalties. For the registration process itself, see our ESIC registration guide.

Quick answer

ESIC covers employees earning wages up to ₹21,000/month (₹25,000/month for persons with disability) in establishments with 10 or more employees. The employee pays 0.75% and the employer 3.25% of wages, by the 15th of the following month. In return the worker and family get full medical care, and the worker gets cash benefits — 70% of wages during sickness, full wages for 26 weeks of maternity and 90% of wages after a workplace injury.

• 'Wages' now follow the Code's definition — basic + DA + retaining allowance, plus excluded allowances above 50%

• Workers on an average daily wage up to ₹176 a day pay nothing; the employer still pays

• Two contribution periods (April–September, October–March) decide cash benefits six months later

• Funeral expenses are now up to ₹20,000; retired members pay ₹600 a year for medical care

The legal basis now

For more than seventy years ESI ran under the Employees' State Insurance Act, 1948. ESIC's circular of 28 November 2025 records that the Act has been repealed and the scheme now runs under Chapter IV of the Code on Social Security, 2020, which took effect on 21 November 2025. The Social Security (Central) Rules, 2026, notified on 8 May 2026 (G.S.R. 344(E)), set the qualifying conditions and amounts for benefits. ESIC's own regulations continue to govern day-to-day procedure.

Nothing changed for existing registrations. Employer codes, insurance numbers (IP numbers), e-Pehchan cards, dispensaries and the monthly contribution system all carry on. What changed are the definitions that decide who is covered and how much is paid.

Which establishments are covered

ESIC applies to factories and establishments employing 10 or more employees. Under the Code, the old "notified area" restriction has gone, so a covered establishment anywhere in India is within the scheme. Establishments with fewer than 10 employees can join voluntarily if the employer and a majority of employees agree, and the Labour Ministry has said coverage is mandatory for establishments where even one person works in a hazardous process.

ESIC's coverage page lists the kinds of establishments states and the centre had already brought in: shops, hotels, restaurants, cinemas, road transport undertakings, newspapers, private medical and educational institutions, insurance and NBFC businesses, ports, airports and warehousing, among others. If you have 10 people on any day, counting contract and casual workers, assume you are covered and register.

ESIC rules at a glance (2026)

₹21,000/month

Wage limit

₹25,000/month for persons with disability

0.75% + 3.25%

Employee + employer contribution

10 or more employees

Establishment threshold

15th of the following month

Contributions due

Which employees are covered: the ₹21,000 limit

Within a covered establishment, every employee whose wages are up to ₹21,000/month a month must be registered — ₹25,000/month for a person with disability. The limit has been the same since 1 January 2017. It did not change when the PF ceiling rose to ₹25,000 in September 2026; a higher ESI limit has been discussed but nothing had been notified by October 2026.

The bigger change is what "wages" means. On 11 December 2025, ESIC headquarters wrote to all regional offices that the Code's definition of wages in section 2(88) now applies to ESIC. That definition counts basic pay, dearness allowance and retaining allowance, excludes items such as HRA, conveyance, overtime and commission, but adds back any excluded items that exceed half of total pay. ESIC's letter warned that "a large no. of exempted employees" in covered establishments are likely to be brought back into coverage, and told field offices to target units where EPFO membership is much higher than ESIC membership.

How overtime and other variable pay are treated in the monthly contribution base is still debated among practitioners. If your pay structures have large allowances, ask your ESIC branch office how it applies the definition to your unit before an inspector does.

When wages cross the limit mid-period

An employee whose wages rise above the ceiling after a contribution period has begun stays covered for the rest of that period. The central government confirmed this in notification S.O. 2351(E) of 8 May 2026. So a worker whose pay goes from ₹19,500 to ₹22,000 in July keeps paying, and keeps their cover, until 30 September. From 1 October they drop out if their wages stay above the limit.

ESIC deduction rules and rates

The contribution rates have been unchanged since 1 July 2019: the employee pays 0.75% of wages and the employer 3.25%, for every wage period. The employer deducts the employee's share from wages, adds its own share and pays both to ESIC within 15 days of the end of the month — by the 15th of the following month.

Low-wage exemption. Employees whose average daily wage is up to ₹176 a day do not pay their share. The employer still pays 3.25%. With most state minimum wages now well above ₹176 a day — Punjab's unskilled rate is ₹518.69 — this mainly affects part-time workers.

No cutting pay to fund contributions. The employer cannot reduce an employee's wages or other benefits because it has to pay ESI contributions. Section 133(c) of the Code makes that an offence with a fine of up to ₹50,000. If you need to budget for newly covered staff, the 3.25% comes out of your margin, not their pay.

No deducting the employer's share. As with PF, the employer's contribution cannot be recovered from the worker. Doing so is an offence under section 133 of the Code, punishable with a fine of up to ₹50,000.

Contribution periods and benefit periods

ESIC splits the year into two six-month contribution periods. Each has a matching cash benefit period that starts three months after the contribution period ends. Whether a worker qualifies for cash benefits — and how much they get — depends on the contributions paid in the matching contribution period.

ESIC contribution periods and the benefit periods they unlock

1 Apr – 30 Sep

Contribution period 1 → cash benefits from 1 Jan to 30 Jun of the following year

1 Oct – 31 Mar

Contribution period 2 → cash benefits from 1 Jul to 31 Dec

15th of each month

Contributions for the previous month due

New joiner

A first contribution period shorter than 156 days — sickness qualifies on half the working days available

The time lag matters in practice. A new joiner's first contribution period is often shorter than six months, and cash benefits based on it begin only when the matching benefit period starts. Rule 22 of the 2026 central rules handles new entrants: if a first contribution period is shorter than 156 days, the worker qualifies for sickness benefit if contributions were payable for at least half the days available. Medical care, by contrast, is available from the first day of insurable employment.

How workers use and claim ESIC benefits

Every registered employee gets a 10-digit insurance number and an e-Pehchan card, and chooses a dispensary when the employer registers them. That number stays with the worker for life, so a new employer should link it rather than create a new one — a duplicate IP number splits the worker's contribution record and can cost them a benefit.

Treatment. The worker and family go first to their ESIC dispensary. Specialist and in-patient care is given at ESIC hospitals run by the Corporation, at ESIS hospitals run by state governments, or at tie-up hospitals on referral. There is no ceiling on what ESIC spends on an insured person's treatment.

Cash benefits. Sickness, maternity and disablement benefits need a medical certificate from an ESIC insurance medical officer or an authorised practitioner — a private doctor's note is not enough. The worker or their family files the claim at the ESIC branch office, and ESIC pays into the worker's bank account. The employer's role is to make sure contributions were paid on time and records are correct, because ESIC checks contribution days before it pays.

Unemployment relief. For RGSKY or ABVKY the worker applies to ESIC after losing the job. ABVKY relief becomes due 30 days after the date of unemployment. An employer who records the correct date of exit makes these claims straightforward.

The Code also widened who counts as family. A widower and a grandparent are now dependants for dependants' benefit, and a woman employee's father-in-law and mother-in-law count as family for medical care. A parent counts as dependent only if their income from all sources is within ₹14,000 a month.

ESIC benefits list with amounts

These are the benefits and rates ESIC publishes, cross-checked against the Social Security (Central) Rules, 2026. Cash benefits are a percentage of the standard benefit rate — the worker's average daily wage in the relevant contribution period.

Worked examples in ₹

Example 1 — monthly deduction. Rekha, a packer in a Ludhiana hosiery unit, earns ₹16,000 in wages. Her payslip shows ESI of ₹120 (0.75%). Her employer pays ₹520 (3.25%) on top. Both go to ESIC by the 15th of the next month, along with the contributions for every other covered worker.

Example 2 — sickness benefit. Suppose Rekha's standard benefit rate for the relevant contribution period works out to ₹620 a day. Sickness benefit is 70% of that, about ₹434 a day. She is certified unfit for 10 days. The first two days are a waiting period, so ESIC pays 8 days: about ₹3,472. If she falls sick again within 15 days, the waiting period doesn't apply to the second spell.

Example 3 — maternity benefit. An insured woman with 70 or more contribution days across the two previous contribution periods and a standard benefit rate of ₹600 a day gets ₹600 for each day she does not work during 26 weeks — roughly six months' full wages, paid by ESIC, not the employer. If she already has two surviving children, the period is 12 weeks.

Example 4 — crossing the limit. Arjun earns ₹20,000 until June, then gets a raise to ₹23,000 from July. He stays an ESI employee until 30 September and pays 0.75% of ₹23,000 (₹172.50) for July to September. From October he is outside the scheme, unless his wages under the Code definition are still within ₹21,000.

Employer obligations under ESIC rules

ESIC employer duties

0/9

• Register the establishment once you reach 10 employees (counting contract and casual staff)
• Register every eligible employee on the ESIC portal when they join, with family and nominee details
• Test each employee against ₹21,000 using section 2(88) wages, not gross salary
• Deduct only the employee's 0.75% from wages; pay the employer's 3.25% yourself
• Pay contributions by the 15th of the following month
• Keep coverage running until the end of the contribution period if wages cross the limit
• Report every employment injury in Form 16 — immediately if serious, otherwise within 24 hours
• Keep wage, attendance and accident records ready for the Inspector-cum-Facilitator
• Check that contractors working at your premises cover their workers

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Reporting accidents

ESIC's accident-reporting rule comes from regulation 68 of the ESI (General) Regulations, which continue to guide procedure. The employer must send an accident report in Form 16 to ESIC and the insurance medical officer immediately if an injury is likely to cause death, permanent disablement or loss of a limb, and within 24 hours in any other case. Serious cases should be sent by the fastest available means. A report already filed under factory law can be used if it includes the extra details Form 16 asks for.

Late reporting delays the worker's disablement benefit and invites scrutiny. An unreported accident discovered during a claim can lead to an inquiry into whether the employer was covering the worker at all.

Penalties for breaking ESIC rules

Late contributions attract simple interest at 12% a year (simple) under section 127 of the Code, and damages under section 128 that cannot exceed the arrears. Section 133 sets the criminal penalties:

• Not paying contributions after deducting the employee's share: 1 to 3 years' imprisonment and a fine of up to ₹1 lakh.
• Not paying contributions in any other case: 2 to 6 months' imprisonment and a fine of up to ₹50,000.
• Deducting the employer's share from wages, failing to file returns or reports, or other non-compliance: a fine of up to ₹50,000.
• Obstructing an inspector or making a false statement: up to six months' imprisonment, a fine of up to ₹50,000, or both.

Common ESIC mistakes

Testing coverage on gross salary. Since November 2025 the test is section 2(88) wages. Staff on ₹25,000–₹35,000 gross with large HRA can fall within ₹21,000 wages and must be covered.

Dropping a worker the month their pay rises. Coverage continues to the end of the contribution period. Stopping early leaves the worker uninsured and you liable.

Assuming the PF ceiling applies. PF moved to ₹25,000; ESI did not. Run the two tests separately.

Late accident reports. The 24-hour rule is strict, and the clock starts when the employer or a supervisor learns of the injury.

Creating a second IP number. When an experienced worker joins, ask for their existing insurance number and link it. A fresh number resets their contribution history, so they may fail the 78-day test for sickness benefit or the 70-day test for maternity benefit even though they have contributed for years.

Treating the ₹176 exemption as an employer exemption. It only waives the worker's 0.75%. You still owe 3.25% on that worker's wages every month, and missing it attracts the same interest and damages as any other arrears.

Paying late "because the amount is small". Interest and damages run from the 16th whatever the amount, and repeated late payment is the quickest way to draw an inspection.

Ignoring contractors. Housekeeping and security staff supplied by agencies need ESI cover. Ask for the contractor's ESIC challans each month.

Official links

• ESIC — ContributionRates, ₹176 exemption, contribution and benefit periods
• ESIC — Coverage₹21,000 / ₹25,000 wage limits
• ESIC — BenefitsEvery benefit, rate and claim form
• ESIC employer portalRegistration and monthly contributions
• Social Security (Central) Rules, 2026 (Gazette copy)Rules 21–22: funeral, sickness, maternity, disablement

What to do next

Re-test every employee earning up to about ₹40,000 gross against the ₹21,000 limit using the Code's wage definition, and register anyone who now qualifies. Diarise the 15th of each month and the 1 April and 1 October contribution-period changes. If you haven't registered yet, start with our ESIC registration guide. For the PF side of the same payslip, see PF deduction rules, and use our salary slip generator to show ESI and PF on separate lines.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the ESIC salary limit in 2026?

Employees whose wages are up to ₹21,000/month are covered, or ₹25,000/month for persons with disability. Since the Code on Social Security took effect, 'wages' means basic, DA and retaining allowance plus any excluded allowances above half of pay — not gross salary. ESIC told its offices in December 2025 that many previously exempt employees may now be covered.

How much ESIC is deducted from salary?

The employee pays 0.75% of wages and the employer 3.25%, a total of 4%. On wages of ₹18,000 that is ₹135 from the employee and ₹585 from the employer. Employees whose average daily wage is up to ₹176 a day pay nothing, but the employer still pays its share. Contributions are due by the 15th of the following month.

What are ESIC contribution and benefit periods?

There are two six-month contribution periods: 1 April to 30 September and 1 October to 31 March. Each has a matching cash benefit period that starts three months after it ends: 1 January to 30 June and 1 July to 31 December. Cash benefits such as sickness benefit depend on contributions paid in the matching contribution period.

What happens if an employee's salary crosses ₹21,000?

If wages rise above the ceiling after a contribution period has begun, the employee stays covered and contributions continue until that period ends — 30 September or 31 March. The central government confirmed this rule in S.O. 2351(E) of 8 May 2026. Coverage ends from the next contribution period if wages stay above the limit.

What is the ESIC funeral expense amount?

ESIC pays the actual cost of the funeral up to ₹20,000 when an insured person dies, whatever the cause. The Social Security (Central) Rules, 2026 fixed the amount at ₹20,000. The eldest surviving family member, or whoever paid for the funeral, claims it at the ESIC branch office.

How many days of contribution are needed for ESIC sickness benefit?

The worker must have contributions payable for at least 78 days in the contribution period matching the benefit period. Sickness benefit is 70% of wages of the standard benefit rate for up to 91 days in two consecutive benefit periods. The first two days of a spell are not paid unless it follows another paid spell within 15 days.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Contribution — Employees' State Insurance Corporation · accessed 9 October 2026
2. 2.Coverage — Employees' State Insurance Corporation · accessed 9 October 2026
3. 3.Information — Benefits (last reviewed 5 October 2026) — Employees' State Insurance Corporation · accessed 9 October 2026
4. 4.Social Security (Central) Rules, 2026 — G.S.R. 344(E), 8 May 2026 (Gazette copy) — Ministry of Labour & Employment (Gazette) · accessed 9 October 2026
5. 5.New wage definition u/s 2(88) of the Code on Social Security implemented w.e.f. 21.11.2025 — ESIC letter No. P-11/12/Ministry/MoL&E/2024-Rev.II dated 11.12.2025 (copy) — ESIC Headquarters (copy hosted by United Consultancy) · accessed 9 October 2026
6. 6.Implementation of the Code on Social Security, 2020 — ESIC circular N-11011/2/2025-BFT-II dated 28.11.2025 — Employees' State Insurance Corporation · accessed 9 October 2026
7. 7.Notification S.O. 2351(E) dated 8 May 2026 under section 2(26) of the Code on Social Security (text reproduced) — TaxHeal (reproduction of Gazette notification) · accessed 9 October 2026
8. 8.Labour Codes backgrounder (December 2025) — Press Information Bureau · accessed 9 October 2026
9. 9.Code on Social Security, 2020 — section 133 — AdvocateKhoj (bare act text) · accessed 9 October 2026
10. 10.ESI (General) Regulations, 1950 — regulation 68, report of accident by employer — AdvocateKhoj (regulation text) · accessed 9 October 2026
11. 11.ESI wage ceiling holds at ₹21,000 for FY 2026-27 — IndianHRM · accessed 9 October 2026