ESIC Contribution Rules 2026: Rates, the ₹21,000 Limit and the New Wage Definition
ESI is 0.75% of wages from the employee and 3.25% from the employer, for wages up to ₹21,000 a month. Since the labour codes, HRA and conveyance are left out of wages, which changes who is covered.
Updated 27 September 2026 · 4 minute read
ESI takes 0.75% of an employee's wages and adds 3.25% from the employer, 4% in all, for anyone whose wages are ₹21,000 a month or less (₹25,000 for a person with a disability). The rates have not changed since July 2019 and the ceiling has not changed either. What did change is the meaning of "wages": since the labour codes came into force on 21 November 2025, ESI follows the Code on Social Security's definition, which leaves out HRA, conveyance and several other allowances. That can move people into ESI who were outside it, and lower the contribution for others.
The rates
| Rate | On wages of ₹18,000 | |
|---|---|---|
| Employee's share | 0.75% | ₹135 |
| Employer's share | 3.25% | ₹585 |
| Total | 4% | ₹720 |
- Ceiling: ₹21,000 a month of wages, or ₹25,000 for a person with a disability. Above that, the employee is not covered.
- Low earners: an employee whose average daily wage is ₹176 or less pays nothing; the employer still pays its 3.25%.
- Rounding: each contribution is rounded up to the next rupee.
The EPF wage ceiling went up to ₹25,000 on 17 September 2026, but the ESI ceiling did not move. The two are separate; see the EPF wage ceiling guide.
What counts as wages now
Under the Code on Social Security, wages mean all pay, and they include basic pay, dearness allowance and retaining allowance. Some items are left out: HRA, conveyance allowance, bonus, overtime, commission, the employer's PF contribution and a few others. There is one catch. If the left-out items add up to more than half of total pay, the excess is counted back into wages.
Before this, ESI worked on something close to gross salary, HRA and conveyance included. The effect runs both ways:
| Monthly pay | Wages for ESI now | Covered? | Employee's ESI | Employer's ESI |
|---|---|---|---|---|
| Basic ₹10,000, HRA ₹5,000, conveyance ₹3,000: gross ₹18,000 | ₹10,000, since left-out items are under half of pay | Yes, as before | ₹75, down from ₹135 | ₹325, down from ₹585 |
| Basic ₹12,000, HRA ₹12,000, conveyance ₹6,000: gross ₹30,000 | ₹15,000: left-out items of ₹18,000 exceed half of pay by ₹3,000, which is added back | Yes, where gross of ₹30,000 used to put them outside | ₹113 | ₹488 |
The second row is the one that catches employers out. Someone earning ₹30,000 on paper can now fall within the ₹21,000 ceiling if most of the pay sits in HRA and conveyance. ESIC's notifications of December 2025 put the code's definition into effect for contributions, so it is worth rechecking anyone on the payroll earning up to about ₹42,000 a month. The same wage definition drives PF and gratuity; the labour codes guide explains the 50% add-back.
Contribution periods, and crossing ₹21,000
ESI runs in two six-month contribution periods, 1 April to 30 September and 1 October to 31 March. Each has a matching benefit period that starts three months after it ends, 1 January to 30 June and 1 July to 31 December.
Coverage is decided at the start of a contribution period. If an employee's wages go above ₹21,000 partway through, after a raise for example, contributions continue on the actual wages until that period ends. They stop from the next period. So a raise in July keeps ESI running until 30 September, and a raise in November keeps it running until 31 March.
Who has to register
An establishment with 10 or more employees has to register with ESIC and cover every eligible employee from the day they join. Coverage for smaller establishments is voluntary, except in hazardous work, where it can apply with even one employee.
Contributions for a month are due by the 15th of the next month, paid online through the ESIC portal. The employer deducts the employee's share from salary and pays both shares together. If you run a small team, the employee's ESI goes on the payslip as a deduction next to PF and professional tax; the salary slip generator has a line for it.
What ESI pays for
- Medical care for the employee and their family, from the first day of insured employment, at ESI dispensaries and hospitals.
- Sickness benefit of 70% of wages for up to 91 days a year.
- Maternity benefit of full wages for 26 weeks.
- Disablement benefit after an employment injury, and a pension to dependants if an insured person dies from one.
Tax
The employee's ESI contribution does not qualify for any income tax deduction, in either regime. For the employer, its own 3.25% is a business expense. The employees' share it deducts from salary is deductible only if it reaches ESIC by the due date.
Frequently asked questions
What is the ESIC salary limit in 2026?
₹21,000 a month of wages, or ₹25,000 for a person with a disability. Since 21 November 2025, wages follow the Code on Social Security definition, which leaves out HRA and conveyance unless the left-out items exceed half of total pay.
What is the ESI contribution rate?
0.75% of wages from the employee and 3.25% from the employer, 4% in total. Employees with an average daily wage of ₹176 or less do not pay their share.
Is ESI deducted on gross salary?
Not any more. It is worked out on wages as the labour codes define them: basic pay, DA, retaining allowance and other pay that is not specifically left out, with HRA and conveyance added back only to the extent the left-out items exceed half of total pay.
What happens to ESI if my salary goes above ₹21,000?
Contributions continue until the end of the current contribution period, 30 September or 31 March, and then stop. You keep the benefits linked to the contributions already paid.
Is ESI contribution deductible from income tax?
No. There is no deduction for the employee's ESI contribution in either the old or the new regime.