Introduction to ESI Act:

The Employees’ State Insurance Act of 1948, also known as the ESI Act, was established by the Government of India to offer a range of benefits to employees in situations such as sickness, maternity, disability, and death resulting from work-related injuries.

Essential Guide to the Employees State Insurance (ESI) Act in India : ESIC Act Image

Objectives of the ESI Act 1948:

The main goal of this act is to safeguard employees in the organized sector by implementing a thorough insurance program that ensures their socio-economic well-being. The key aim of the ESI Act is to deliver social security to employees by shielding them from financial hardships caused by health-related problems and workplace injuries as per Indian labour laws.

Overview of the Employees’ State Insurance Act, 1948

ObjectiveTo provide social security and health insurance to employees in case of sickness, maternity, disability, and death due to employment injury.
ApplicabilityApplies to factories and establishments with 10 or more employees.
CoverageEmployees earning up to ₹21,000 per month.
AdministrationManaged by the Employees’ State Insurance Corporation (ESIC).
ESI Act overview

Key Provisions in Employees State Insurance Act :


Funding for the ESI scheme comes from contributions made by both ESI employers and employees. Employers contribute 3.25% of the employee’s wages, while employees contribute 0.75%. These contributions are deposited into the ESI Fund.


The ESI Act is applicable to all factories and establishments with 10 or more employees, covering the entire nation of India except for specific areas where exemptions are specified by the ESI Corporation.


The administration of the ESI Act falls under the jurisdiction of the Employees’ State Insurance Corporation (ESIC), which operates as an independent corporation under the Ministry of Labour and Employment.


Initially, the ESI Act included employees earning up to ₹15,000 per month, which was later increased to ₹21,000 per month in the most recent updates. Employees earning above this threshold are not encompassed by the ESI Act.

The ESIC is responsible for overseeing the implementation and enforcement of the ESI Act 1948, as well as managing the ESI Fund.

ESI Benefits:

BenefitDescriptionESI Eligibility/Conditions
Sickness BenefitCash compensation for loss of wages due to sickness.Paid at 70% of average daily wages for up to 91 days in a year.
Maternity BenefitPaid leave for female employees during maternity.Up to 26 weeks of leave.
Disablement BenefitCompensation for temporary or permanent disablement due to employment injury.Temporary: 90% of average daily wages. Permanent: Varies based on the extent of disability.
Dependents’ BenefitMonthly ESIC payments to dependents of an insured person who dies due to employment injury.Percentage of the wage, based on the number of dependents.
Medical BenefitComprehensive medical care for insured persons and their families.Available at ESI dispensaries, hospitals, and recognized medical institutions.
Other ESI BenefitsIncludes funeral expenses, rehabilitation allowance, and vocational rehabilitation.Varies based on specific conditions and ESIC eligibility criteria.
Benefits of ESIC Act
Benefits of ESIC Act Image

Contributions / Responsibilities of ESI Employers:

ContributorESI Contribution RateDetails
Employee0.75% of the wagesContribution towards ESI fund.
Employer3.25% of the wagesDeducted from the employee’s salary.
Total Contribution4.00% of the wages
Employer’s Contributions / Responsibilities of ESIC act
  • Employers are required to register their establishments under the ESI Act within 15 days of the employees state insurance act coming into effect.
  • ESIC contributions for eligible employees must be deducted and paid by employers on or before the 15th of the following month.
  • Accurate records of employees, wages, and contributions must be maintained as per ESIC requirements.
  • ESIC employers should communicate with employees about their rights and benefits under the ESI scheme and ensure they are informed about available medical facilities.
Contribution of ESI Act

ESI Act Compliance and Inspections:

The Employees’ State Insurance Act, 1948 (ESI Act) ensures that employees receive social security  benefits as outlined in the Act. To ensure compliance, the Employees’ State Insurance Corporation (ESIC) conducts regular inspections of establishments covered by the Act. 

To ensure Labour laws compliance with the ESI Act, the ESIC appoints inspectors who have the authority to conduct inspections at establishments, review records, and ensure adherence to the Act’s provisions.

ESIC Employers are obligated to maintain records and registers as specified by the esi act, and they must provide the necessary information to the inspectors during their visits.

Inspection and Compliance

Key Compliance Requirements:

RegistrationEmployers must register their establishments with the ESIC within 15 days of the Act becoming applicable.
Contribution PaymentsContributions must be paid by the 15th of the following month.
Record MaintenanceMaintain records of wages, attendance, and other employment details.
Return FilingFile periodic returns, such as Form 5 (Return of Contributions) and Form 6A (Annual Return).
Display of InformationDisplay notices and posters at the workplace informing employees about their rights and ESI benefits.
ESI Act Compliance Requirements

Inspections and Penalties under the ESI Act:

1. ESIC designates inspectors to ensure adherence to the ESI Act. These inspectors are authorized to conduct visits to any premises falling under the purview of the employee’s state insurance act 1948.

2. Inspectors are empowered to enter and scrutinize any premises during reasonable hours to verify compliance with the Act. They have the authority to review and authenticate records, registers, and documents related to employment and wages. Additionally, inspectors can interrogate both ESIC employers and employees regarding compliance with the Act.

3. Throughout an inspection, the inspector typically assesses the proper registration of the establishment and its employees. They validate the accuracy of contributions made and records maintained. Inspectors also confirm that employees are receiving the entitled benefits under the Act.

4. Following inspections, inspectors compile detailed reports based on their findings. These reports encompass observations on compliance status, identified discrepancies, and recommendations for corrective measures.

InspectorsAppointed by ESIC to enforce compliance, inspect premises, and examine records.
Inspection PowersInspectors can enter premises, verify records, and question employers and employees.
Penalties for Non-ComplianceFines, imprisonment, interest, and damages for delays in contributions or record-keeping failures.
Inspectors under ESI act

Consequences of Non-Compliance

Failure to comply with the provisions of the ESI Act can result in penalties for employers, including fines and imprisonment. Different types of violations, such as non-payment of contributions, failure to maintain records, or failure to submit returns, carry specific penalties as prescribed by the ESI Act 1948.

Late payment of contributions can incur interest and damages, which the employer is obligated to pay in addition to the outstanding contributions.

Continued non-compliance may prompt the ESIC to initiate legal actions.

ESI Employers may be subjected to litigation and incur additional costs as a consequence of non-compliance.

Best Practices for Ensuring Compliance for Employers

Regular AuditsConduct internal audits to ensure compliance with the ESI Act.
Employee TrainingTrain HR and payroll staff on compliance and educate employees about their rights and benefits.
Timely PaymentsEnsure timely payment of contributions and filing of returns.
Record KeepingMaintain accurate and up-to-date records as required by the ESI Act.
Engagement with ESICCommunicate with ESIC officials for guidance and address labour laws compliance issues proactively. Foster open communication with ESIC officials and seek guidance on labour laws compliance matters.
Best Practices for Ensuring Compliance under ASIC act

By adhering to these compliance requirements and adequately preparing for inspections, employers can fulfil their obligations under the ESIC Act 1948 and provide essential social security benefits to their employees.

Record Maintenance with form:

  • Register of Employee – Form 6
  • Accident Book – Form 11
  • Inspection Book – 102 A
  • Contribution of Employee – Form 32


The ESI Act, 1948, plays a vital role in delivering social security and health insurance to employees in India. Through the provision of diverse ESI benefits and guaranteeing medical care, the employees state insurance act strives to improve the well-being of workers and their families. Employers are required to comply with the provisions of the ESI Act to ensure adherence and contribute to the overarching objective of providing social security to employees.