ESI (Employee State Insurance) | Meaning

What is ESI?

The full form for ESI is Employee State Insurance. It is a contributory self-fund for the employees. Both the Employers and employees take part in it, or more specifically, both the employers and employees contribute to The Employee State Insurance. ESI works as a financed healthcare and insurance fund for Indian employees. ESI is managed and operated by the Employee State Insurance Corporation. This specific institution is actually a government body of India. This contributory fund is governed by the ESI Act 1948. 


But not all the institutions or employees can be part of this contributory scheme. The factories at least have to have 10 or more employees to get the benefits of The Employee State Insurance.

Also, not all the employees of the institution will get covered by the scheme. There are also specific criteria for the employees. Only those employees whose monthly income does not exceed Rs. 21,000 (excluding overtime, bonus, leave encashment, etc.) are eligible to get covered by ESI. 

Mathematical calculation: 

The rate of the contribution in the ESI scheme is calculated on the wages paid. The employer has to contribute 3.25% of wages paid, and the employee has to contribute 0.75% of wages paid (Wages paid and wages payable are the same thing). 

Advantages of ESI 

  1. The employee and his/her family will get medical support at uncertain and unwanted times.
  2. Elderly members will get medical expenses.
  3. Pregnant women are able to take maternity leave.
  4. If an employee dies during the job period/on the job, then 90% of his/her pay will be paid to their dependents for every month. This will continue for the rest of their lives.
  5. The aforementioned rules will be applied in the same way in case of any kind of disability of the employees.

These are some key advantages of ESI (The Employee State Insurance). 

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