Quick Answer: Employees' State Insurance Corporation (ESIC) contribution rates are 3.25% of wages from the employer and 0.75% from the employee, a combined 4%. Rule 19 of the Social Security (Central) Rules, 2026 carries those rates. Chapter IV of the Code on Social Security, 2020 applies to an establishment, other than a seasonal factory, employing ten or more persons.
The instrument behind those rates changed. The Employees' State Insurance Act, 1948 stands repealed from 21 November 2025, and coverage, contributions and returns to ESIC now arise under Chapter IV of the Code on Social Security, 2020. The rates are unchanged. The provisions an employer cites are not.
| Item | Position in 2026 | Where it now sits |
|---|---|---|
| Employer's contribution | 3.25% of wages, rounded up to the next rupee | Rule 19(1)(a), Social Security (Central) Rules, 2026 |
| Employee's contribution | 0.75% of wages, rounded up to the next rupee | Rule 19(1)(b), same Rules |
| Coverage threshold | ten or more persons, other than a seasonal factory | First Schedule to the Code, Chapter IV entry |
| Single-employee trigger | a notified hazardous or life-threatening occupation | First Schedule, first proviso |
| Wage ceiling | ₹21,000 a month, and ₹25,000 for a person with disability | Rule 50, ESI (Central) Rules, 1950, saved |
| Employee's share waived | average daily wages in a wage period up to ₹176 | Rule 52, ESI (Central) Rules, 1950, saved |
| Payment deadline | within 15 days of the last day of the calendar month | Regulation 31, ESI (General) Regulations, 1950 |
What Are the ESIC Contribution Rates for Employers and Employees?
The employer pays 3.25% and the employee pays 0.75%, a combined 4%. Rule 19(1) of the Social Security (Central) Rules, 2026 sets both figures, and section 29(2) of the Code is the provision it hangs on.
Two details in Rule 19 are easy to miss. Each share is rounded to the next higher rupee, and the rounding applies to each share separately. ESIC records the rates as effective from 1 July 2019.
Which Wages Is the Contribution Calculated On?
On "wages" as section 2(88) of the Code defines them: basic pay, dearness allowance and retaining allowance, with eleven heads excluded, house rent allowance and overtime among them.
A proviso claws part of that back. Where payments under sub-clauses (a) to (i) of the exclusion list exceed one-half of all remuneration, the excess is deemed remuneration and added into wages. The same definition drives the revised provident fund wage ceiling.
Is Either Share Ever Waived?
Yes, at both ends. Rule 19(2) relieves the employer of its own share for up to three years from the start of the contribution period, for a person with disability under the Rights of Persons with Disabilities Act, 2016 and the National Trust Act, 1999. The Central Government reimburses it under Rule 19(3).
The employee's share is waived at the other end of the scale. Rule 52 of the ESI (Central) Rules, 1950 sets that exemption at average daily wages in a wage period "upto and inclusive of rupees one hundred seventy-six only", and the employer still pays its own share. The 2026 Rules do not reproduce it, and under the Code the lever is a notification under section 2(31).
When Does ESIC Apply to an Establishment?
The First Schedule to the Code applies Chapter IV to "every establishment in which ten or more persons are employed other than a seasonal factory". An establishment sitting at exactly ten is inside the net, because the test is "ten or more" and not a number that must be exceeded.
A proviso widens it. Chapter IV also reaches an establishment carrying on a hazardous or life-threatening occupation notified by the Central Government "in which even a single employee is employed".
When Does the Contribution Actually Become Payable?
Only once benefits are available. The third proviso to the Chapter IV entry makes contributions payable from the date the Corporation provides Chapter IV benefits to that establishment, on a date the Central Government notifies.
That matters geographically. ESIC records the scheme as notified in 668 districts, 565 fully and 103 partially, and says it "is yet to be notified in 135 districts". An establishment can be inside the headcount test and outside the obligation.
Does Coverage Stop If Headcount Falls Below Ten?
No. Section 1(8) keeps an establishment covered even if the headcount later falls below the threshold, as it does for Chapter III and provident fund coverage.
An establishment below the threshold may also join voluntarily. Under section 1(7) the Director General of the Corporation may apply Chapter IV by notification where the employer and the majority of employees have agreed.
What Is the ESIC Wage Ceiling?
₹21,000 a month, and ₹25,000 for a person with disability. Section 2(26) limits "employee", for Chapter IV, to a person drawing wages less than or equal to the wage ceiling, and section 2(89) leaves that ceiling to be notified.
No Chapter IV notification has been issued under section 2(89). The figure still rests on Rule 50 of the ESI (Central) Rules, 1950, and ESIC publishes it as effective from 1 January 2017. Do not read across from provident fund: the ₹25,000 notified by S.O. 5109(E) on 17 September 2026 is expressly "for the purposes of Chapter III".
What If an Employee Crosses the Ceiling Mid-Period?
Coverage runs to the end of the contribution period. A notification under the first proviso to section 2(26) keeps an employee who crosses the ceiling "at any time after, and not before, the beginning of the contribution period" an employee for the remainder of that period. The exclusion of overtime remuneration from the comparison still rests on Rule 50.
How Is the ESIC Contribution Calculated?
Apply 3.25% and 0.75% to section 2(88) wages for the wage period, then round each share up to the next rupee. Section 29(4) makes contributions fall due on the last day of the wage period.
| Monthly wages under section 2(88) | Employer at 3.25% | Employee at 0.75% | Total |
|---|---|---|---|
| ₹15,000 | ₹488 | ₹113 | ₹601 |
| ₹20,000 | ₹650 | ₹150 | ₹800 |
| ₹21,000 | ₹683 | ₹158 | ₹841 |
At ₹21,000 the shares compute to ₹682.50 and ₹157.50, and Rule 19 rounds each up.
When Must ESIC Contributions and Returns Reach the Corporation?
Contributions must be paid within 15 days of the last day of the calendar month in which they fall due, and the return of contributions in Form 5 must reach the appropriate office within 42 days of the end of the contribution period.
| Obligation | Deadline | Provision |
|---|---|---|
| Payment of contributions | within 15 days of the last day of the calendar month | Regulation 31 |
| Return of contributions, Form 5 | within 42 days of the end of the contribution period | Regulation 26(1)(a) |
| Return on requisition | within 7 days of receipt | Regulation 26(1)(c) |
The two contribution periods run 1 April to 30 September and 1 October to 31 March, with benefit periods beginning on 1 January and 1 July. All of this sits in ESIC's published Employees' State Insurance (General) Regulations, 1950, made under the repealed Act and held in force by section 164(2) of the Code.
Why Are the 1950 Instruments a Watch-Point?
Because section 164(2) saves them on two bases that do not match. Clause (a) keeps anything done under a repealed enactment in force "till they are repealed". Clause (b) is narrower: it holds the rules and regulations made under the 1948 Act in force only "for a period of one year from the date of commencement of this Code". Chapter IV commenced on 21 November 2025.
The rates are safe, because Rule 19 is made under the Code itself, and interest now rests on a Code notification. The wage ceiling, the ₹176 exemption, the periods, the deadlines and the damages scale are saved provisions awaiting replacement.
What Does a Late Payment Cost?
Interest, damages and, separately, criminal exposure. Under section 127 the Central Government has notified simple interest at 12% per annum, running from the date an amount becomes due until it is actually paid. Section 128 lets the Director General recover damages not exceeding the arrears, after hearing the employer.
| Exposure | Amount | Provision |
|---|---|---|
| Interest on arrears | 12% per annum from the due date until payment | Section 127 notification |
| Damages, by length of delay | maximum 5%, 10%, 15% or 25% per annum | Regulation 31C |
| Failure to deposit the deducted employee's share | not less than 1 year, up to 3 years, and a ₹1 lakh fine | section 133(i)(a) |
| Any other failure to pay a contribution | not less than 2 months, up to 6 months, and a ₹50,000 fine | section 133(i)(b) |
| Deducting the employer's share, or not filing a return | fine up to ₹50,000, no imprisonment | sections 133(b), 133(e) |
| Repeat failure to pay, after a conviction | not less than 2 years, up to 3 years, and a ₹3 lakh fine | section 134, proviso |
Withholding a deduction already taken carries the one-year floor, because section 31(4) deems that sum entrusted to the employer.
How Is the ESIC Obligation Tracked Across Entities?
Registration, collection and the return all sit with ESIC. The employer's side is evidence.
LexComply's global compliance management platform maps each ESIC obligation to the entity, location and registration it belongs to, and holds the challan and the return against the obligation they discharge, with labour-law questions answerable through LexComply's AI labour law assistant. The payment is made to the Corporation; the platform records that it was made on time by a named owner, alongside the wider payroll statutory picture. Where the employer operates across States, the Labour Welfare Fund adds its own contribution dates, set State by State.
Common Mistakes to Avoid
- Citing the Employees' State Insurance Act, 1948 as the governing statute. It is item 2 in the repeal schedule at section 164(1), commenced by S.O. 5319(E) dated 21 November 2025. Chapter IV of the Code on Social Security, 2020 governs instead.
- Applying the ₹25,000 wage ceiling to ESI. S.O. 5109(E) notified that figure "for the purposes of Chapter III", which is provident fund. The ESI ceiling is ₹21,000.
- Excluding above-ceiling employees from the headcount. The second proviso to section 2(26) requires them to be counted. Only their own membership turns on the ceiling.
- Treating damages under section 128 as a floor. It caps them at "an amount not exceeding the amount of arrears", and Regulation 31C's percentages are maximum rates.
- Believing a Jan Vishwas amendment cut the ESI penalties. Neither the Jan Vishwas (Amendment of Provisions) Act, 2023 nor the Act of 2026 reaches the 1948 Act or the Code.
Legal Disclaimer
This article is general information on Indian social security legislation as at 10 October 2026 and is not legal advice. Rates, the wage ceiling and the notification of the scheme are set and revised by the Central Government and by ESIC, so verify the current position with ESIC or a qualified adviser before acting.
