News Update (in Details)

ESI Contribution Rate 2026: Current Percentage for Employer & Employee

30 second summary | In 2026, ESI contribution remains 4% of gross wages (3.25% employer, 0.75% employee). Coverage applies up to ?21,000 monthly wages, and ?25,000 for employees with disabilities. Contributions must be deposited by the 15th each month, ensuring access to medical, sickness and maternity benefits. Accurate compliance is essential.

The Employee State Insurance Scheme (ESI) contribution rate in 2026 is 4% of an employee’s gross wages, shared between the employer and the employee as per the Employees’ State Insurance Act, 1948. This includes an employer contribution of 3.25% and an employee contribution of 0.75%, unchanged since the July 2019 revision.

These ESI rates apply to eligible employees within prescribed wage limits and form a mandatory part of payroll compliance for covered establishments, making accurate calculation and timely payment essential.

What is the ESI scheme and who governs it?

The Employees’ State Insurance scheme is a self-financing social security programme established under the ESI Act, 1948. It provides medical, sickness, maternity, disability and dependent benefits to workers in the organised sector and their families.

Administered by the Employees’ State Insurance Corporation (ESIC) under the Ministry of Labour and Employment, the scheme was operationalised in 1952, initially covering factory workers. Today it extends to 713 districts across the country.

Who is covered under the ESI scheme?

The ESI scheme generally applies to factories and notified establishments employing 10 or more persons, including shops, hotels, restaurants, cinemas, road transport establishments, newspapers, private educational institutions and medical institutions, subject to state-specific notifications under the ESI Act.

Employees drawing monthly wages up to ?21,000 are mandatorily covered. For employees with disabilities, the ESI wage limit is higher at ?25,000 per month.

Who is exempt from ESI deduction?

Employees in receipt of a daily average wage up to ?176 are exempted from payment of their own contribution. Employers, however, must still contribute their share in respect of these employees.

What happens when an employee’s salary crosses ?21,000?

If an employee’s salary crosses ?21,000 during a contribution period, April to September or October to March, they remain covered until the end of that period. ESI deductions continue until the period ends, even if the salary exceeds the threshold mid-period.