Employees’ State Insurance Scheme (ESIC) Explained | Benefits, Compliance & Employer Duties

Employees’ State Insurance Scheme (ESIC) Explained | Benefits, Compliance & Employer Duties

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February 06, 2026

STANDARD NOTE • ESIC • Employees’ State Insurance Scheme

The Employees' State Insurance Corporation (ESIC) was established under the Employees’ State Insurance Act, 1948 to safeguard workers through social insurance benefits. Eligible establishments must register and comply to enable benefits that support employees and their families during illness, maternity, disability and in the event of death. Non-compliance can lead to penalties and legal consequences. Employers must therefore ensure registration, correct contributions and process discipline to protect workforce wellbeing and remain fully compliant with the laws of the land.

What ESIC does

Provides structured medical and cash benefits for eligible employees and their dependents, funded through contributions.

Why compliance matters

Ensures employees receive statutory support and reduces employer risk arising from defaults, penalties and disputes.

Coverage snapshot

Applicable to establishments with 10 or more employees; wage eligibility currently up to ₹21,000 per month.

Policy lens

The ESI Act under the Code on Social Security, 2020

The ESI Act, 1948 along with multiple central labour enactments has been subsumed into the Code on Social Security, 2020 (Act 36 of 2020). The Code has not yet been implemented. Draft rules were notified for stakeholder consultation, and the benefits under ESI have been retained. Under the Code, Aadhaar seeding may be required for benefits as per Section 142. The Code also signals broader pan-India extension of ESI coverage to establishments employing 10 or more employees, beyond notified districts/areas, with contributions to apply from the notified date when ESIC benefits are provided.

Note on ESIC statistics

Statistics for ESIC may be inserted here as and when final data points are approved for publication.

Core benefits

Benefits provided under the ESI Scheme

Section 46 of the ESI Act, 1948 provides six primary social security benefits: Medical, Sickness, Maternity, Disablement, Dependants and Funeral Expenses. The scheme also provides need-based reliefs.

A. Medical Benefits

What ESIC covers

OPD consultations, hospitalisation (no upper limit), surgeries, medicines, diagnostics, chronic disease treatment and pre-existing diseases (covered from Day 1).

Who is covered

Employee, spouse, dependent children and dependent parents.

B. Sickness Benefit

If an employee is unfit to work due to illness, ESIC supports with wage compensation.

70% of wages (up to 91 days in a year, subject to eligibility and conditions).

Helps reduce attrition during medical emergencies and prevents stress-driven absenteeism.

C. Extended Sickness Benefit (Critical Illness)

Supports long-term illnesses such as cancer, tuberculosis, renal failure and heart diseases.

80% wage payment for up to 2 years (subject to eligibility and ESIC norms).

This is a benefit that private insurers typically price at a premium.

D. Maternity Benefits

For eligible female employees:

100% wage payment for up to 26 weeks, including specified cases such as miscarriage and adoption (as applicable).

Employer impact

No direct maternity wage burden, reduced need for separate maternity insurance and statutory compliance is supported through ESIC (subject to coverage and conditions).

E. Disablement Benefit (Employment Injury)

Temporary disablement

90% of wages payable as long as disability continues (as per ESIC norms).

Permanent disablement

Lifetime monthly pension based on loss of earning capacity.

Helps shield employers from compensation disputes, liability claims and long-term medical cost exposure (subject to coverage).

F. Dependants’ Benefit (Death Due to Employment Injury)

In case of death due to employment injury:

90% of wages paid monthly to dependents, continuing as per eligibility.

A strong safety net with zero additional employer liability beyond statutory compliance.

G. Funeral Expenses

One-time funeral expense support up to ₹15,000, paid to the family as per eligibility and process.

H. Unemployment Allowance (RGSKY)

Rajiv Gandhi Shramik Kalyan Yojana supports eligible insured persons in case of job loss due to closure, retrenchment or permanent disability.

Allowance for up to 24 months and continued medical cover, subject to eligibility.

ESIC investments snapshot (as on 31.12.2023)

Insert the approved investment break-up chart or table here once finalized for publication.

Contributions and value

Input versus output: contributions compared to benefits

Input (contributions)

The ESI scheme is funded through contributions by both employer and employee.

Contribution rate: 4% of gross wages — 0.75% employee share and 3.25% employer share.

Applicability generally extends to establishments with 10 or more employees; wage coverage for employees up to ₹21,000 per month.

Output (benefits)

ESIC provides comprehensive medical care and cash benefits in defined scenarios such as sickness, maternity, disablement and dependants’ support.

For many employers, the practical value is predictable statutory protection, fewer employee hardship escalations and reduced exposure in event-driven claims—when the system is compliant and documentation is strong.

Community and industry role

Role of Karma Global in engaging with the community

Besides providing compliance support to organizations seeking help in meeting legal obligations, Karma Global actively engages with community and industry associations, bodies, forums and chambers to promote awareness of ESI benefits. By strengthening compliance practices and enabling essential statutory benefits to eligible employees, Karma Global supports business houses in building a more resilient workforce ecosystem.

National leadership engagement

Following the appointment of Pratik Vaidya as Director on the National Executive Council of the Indo American Chamber of Commerce, the focus includes policy dialogue and enabling compliant and sustainable business practices through structured platforms for knowledge exchange.

MSME compliance voice

As Head and Convenor of the HR Compliance and Labour Committee at India SME Forum, the role supports MSMEs with practical inputs on labour code transition and transparent, business-friendly compliance practices.

Need help with ESIC compliance

For any assistance and support, you may write to marketing@karmamgmt.com

Disclaimer: This note is for general information and should not be treated as legal advice. Applicability and benefits are subject to ESIC rules and eligibility conditions.

Employees’ State Insurance Scheme (ESIC) Explained | Benefits, Compliance & Employer Duties