How the ESI Salary Limit Works, and Who It Covers
₹21,000 a month, unchanged since 2017. The three routes that bring a workplace into the scheme, why a raise in July does not end cover in July, and the 135 districts still outside it.
The ESI salary limit is ₹21,000 a month. Earn that or less in a covered workplace and you have to be insured under ESI (Employees’ State Insurance).
The trouble starts when somebody goes over it. A raise does not end their cover the same month, and stopping the deduction then is the most common ESI mistake there is. It costs money.
This page sets out what the limit is today, who has to be covered at all, and what happens the moment somebody crosses it.
Key Takeaways
- What it is: the monthly wage at or below which an employee has to be covered by ESI.
- The limit: ₹21,000 a month, and ₹25,000 for a person with disability.
- Who the employer must be: a factory with 10 or more people, or one of the types a state or the centre has notified. Three routes in.
- What it costs: 0.75% from the employee and 3.25% from the employer.
- Crossing the limit: cover runs to the end of the six-month contribution period, not to the month of the raise.
- Overtime: left out of the test for the limit.
- Not everywhere: the scheme is notified in 668 districts and is yet to be notified in 135.
The ESI Salary Limit Right Now
The Employees’ State Insurance salary limit is ₹21,000 a month. An employee earning that or less, in a covered establishment, has to be insured under the scheme.
ESIC (Employees’ State Insurance Corporation) puts the figure at ₹21,000 a month, effective from 1 January 2017, and ₹25,000 a month in the case of a person with disability.
That date is worth noticing. The limit has not moved since. Talk of raising it comes round often, but talk is not an order. Until one is issued, ₹21,000 is the number to work to.
In Simple Words
₹21,000 or less means the person must be covered. Above it, they are outside the scheme, subject to the crossing rule below.
Who the ESI Salary Limit Covers
The salary limit only matters if your workplace is covered in the first place. Three routes bring one in, and they do not share a headcount.
| Type of establishment | Headcount that triggers it |
|---|---|
| Non-seasonal factory | 10 or more persons |
| Shops, hotels, restaurants, cinemas, road transport, newspapers, private medical and educational institutions, where a state has notified them | As the state has set it |
| The central government’s own notified list, including insurance, non-banking finance, port trusts, airport authorities and warehousing | 20 or more persons |
The factory number comes from the Act itself. The rest were added by state and central orders. That is why a restaurant in one state can be covered while the same business elsewhere is not.
Check which notification covers your type of establishment before assuming either way. The list is not the same in every state.
Where ESI Does Not Apply at All
Where you are matters as much as how many people you employ. This is what catches a business opening its second site.
The Three Levels of Notification
The scheme runs in 668 districts across 36 states and union territories. In 565 of them it covers the whole district.
In the other 103 it reaches only the district headquarters and the main industrial centres.
And 135 districts are still outside it. Staff working there are not brought into ESI by their pay alone.
ESIC publishes the position district by district, so this is checkable rather than guessable. Do it before you open, not after the first payroll run.
When Your Sites Straddle the Line
A head office in one district and a unit in another can sit on opposite sides of that line. You would be running two rules at once, in one business.
What Counts for the ESI Salary Limit?
Gross monthly wages, with one important exclusion.
Leave overtime out when you test pay against the limit. ESIC says overtime comes and goes, so counting it would push a person in and out of the scheme month by month.
The Two Figures, and What Each Is For
That does not mean overtime escapes the deduction. Two different figures are doing two different jobs.
- To test whether someone is inside the ₹21,000 limit, use regular monthly wages and leave overtime out.
- To work out the 4% due, use the full wages for the month, overtime included.
In Simple Words
Get those two the wrong way round and you drop somebody out of the scheme who should be in it.
Crossing the ESI Salary Limit
This is where the money is lost. Wages that cross ₹21,000 partway through a period do not take the person out of the scheme that month.
The ESI Act says so at section 2(9). An employee whose wages exceed the limit at any time after the beginning of a contribution period shall continue to be an employee until the end of that period.
The Two Contribution Periods
There are two contribution periods in a year, each of six months: 1 April to 30 September, and 1 October to 31 March.
ESIC’s own answers put it plainly. The person stays an employee till the period ends. Contribution is due on the total wages earned in it.
Backdated Raises
A backdated raise works the same way. Where a rise dated to an earlier month takes a person over the limit, cover still runs to the end of the period.
What ESI Costs, and Who Pays
Both sides contribute, and the shares are not equal.
| Who | Share of wages |
|---|---|
| Employee | 0.75% |
| Employer | 3.25% |
| Total | 4% |
One exception is worth knowing. Staff whose daily average wage is ₹176 or less pay no share at all. The employer still pays theirs.
When Payment Is Due
Payment is due within 15 days of the end of the month in which the contribution falls due.
What the Contribution Buys
What you pay in one half of the year buys cover in a later one. ESIC pairs each contribution period with a cash benefit period.
| Contribution period | Cash benefit runs |
|---|---|
| The April to September half | 1 January to 30 June the following year |
| The October to March half | 1 July to 31 December |
Our guide to finding an ESIC number covers what you need before any of this can be filed.
Where the ESI Salary Limit Trips You
The faults repeat, and they differ by how a business is set up.
| Type of business | The usual fault |
|---|---|
| Manufacturing unit running overtime | Overtime added into the test, so a person is wrongly treated as outside |
| Retail chain across districts | One branch in a district where the scheme is not notified, treated the same |
| Restaurant group | Deduction stopped in the month of the raise, not at the period end |
| Private hospital or clinic | Covered by a state notification nobody checked |
| School or coaching institute | Contract staff left out of the headcount that decides coverage |
Four of those five are not about the number at all. They are about who and where, which the number never settles on its own.
In Attendo (formerly Petpooja Payroll), the wage the ESI test runs on comes from the same attendance to salary workflow as the salary. The deduction and the return start from one number.
Your ESI Salary Limit Checklist
Run your own position past five questions before the next contribution period starts.
- Is the establishment covered at all, by headcount and by the notification that applies to its type?
- Is the district notified, for every location you run?
- Are you testing regular wages against ₹21,000, with overtime left out?
- For anyone who crossed the limit, are deductions running to the end of the period?
- Is anybody on a daily average wage of ₹176 or less, where only your share is due?
The short version is this. ₹21,000 decides who comes in, the contribution period decides when somebody goes out, and the district decides whether any of it applies.
For the other statutory deduction staff ask about, see our guide to EPF (Employees’ Provident Fund) forms.
One caution is worth keeping. This page gives the central position as ESIC states it. States differ, and a change to the limit would move the first number here. Check the date before you quote it.
Frequently Asked Questions
Q1. What is the ESI salary limit?
Q2. Is ESI deducted if salary crosses ₹21,000 mid-year?
Q3. Is overtime counted when checking the limit?
Q4. What percentage of salary is ESI?
Q5. Does ESI apply everywhere in India?
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