An overview of the Employee State Insurance (ESI) scheme will cover its purpose, coverage, benefits, contributions, and other vital aspects. 

Introduction to Employee State Insurance (ESI) Scheme

The Employee State Insurance (ESI) Scheme is a comprehensive social security and health insurance scheme for Indian workers. It provides financial protection to employees and pregnant women in case of sickness, disability, or death due to employment injury. Administered by the Employee State Insurance Corporation (ESIC), it covers employees and their families.

Purpose of the ESI Scheme

  • To provide financial assistance to employees and their families in health-related distress.
  • To offer medical care to employees and their family members.
  • To ensure workers are protected against the financial impact of health-related issues.
  • Covers all the employee or labour working the premises directly or indirectly in the principal’s place of business


  • Applicable to non-seasonal factories employing 10 or more persons.
  • Extended to shops, hotels, restaurants, cinemas, and private medical and educational institutions in some states.
  • Extended to all the employers who directly or indirectly engage labour working on their premises


  • Contributions from both employers and employees finance the scheme.
  • The government fixes the contribution rate: employers contribute 4.75% of the wages payable to employees, while the employees contribute 1.75% of their salaries.

Now, let’s delve into the detailed rules and extracts from the act in bullet points.

Detailed Rules and Extracts from the ESI Act


  • Initially, the ESIC Act applied to non-seasonal factories employing 10 or more persons.
  • Over time, the scope has been expanded to include shops, hotels, restaurants, cinemas, preview theatres, road-motor transport undertakings, and newspaper establishments.
  • Educational and medical institutions (not being factories) in certain states and Union Territories are also covered under the Act.
  • Employees earning wages up to a specific ceiling are eligible for ESIC coverage. This ceiling is subject to periodic revision to reflect inflation and changes in the cost of living.
  • As of the last update, employees earning up to Rs. 21,000 per month are covered under the ESIC Act. This limit is Rs. 25,000 for persons with disabilities.
  • The Act covers all employees of an eligible establishment, including full-time, part-time, temporary, and contract workers.
  • Apprentices, as defined under the Apprentices Act, are excluded from the purview of the ESIC Act.
  • The eligibility extends to employees engaged in manual, clerical, technical, or otherwise tasks and is paid in connection with the work of an establishment covered by the ESIC Act.
  • It includes workers who are employed directly by the employer as well as those engaged through contractors.


  • Individuals earning more than the prescribed wage threshold.
  • Employees working in establishments covered by a State Government health insurance scheme provided the scheme offers comparable or better benefits than the ESIC.
  • Family members of the insured person, unless they are independently employed in a covered establishment and meet the wage criteria.

Registration Requirement

  • Employers must register their establishment under the ESIC within 15 days of becoming eligible (i.e., employing the minimum number of persons or engaging in activities covered by the Act).
  • Employees are automatically covered from the day they commence employment in an eligible establishment, and there is no requirement for individual registration by employees. However, they must furnish their details to the employer for registration under the scheme.

  Voluntary Coverage

  • In some instances, establishments employing less than the minimum number of required employees or those not engaging in activities typically covered by the Act can opt for voluntary coverage under the ESIC, subject to approval by the Corporation.


  • Medical Benefit: Full medical care for the employee and their family, including doctors’ visits, hospitalisation, surgery, and drugs.
  • Sickness Benefit: Financial assistance, up to 70% of wages during medical leave.
  • Maternity Benefit: Paid leave for pregnancy and confinement, up to 100% salary.
  • Disablement Benefit: Financial assistance in case of permanent or temporary disablement due to employment injury.
  • Dependants’ Benefit: Pension provided to dependents in the event of the death of an employee due to employment injury.
  • Other Benefits: Unemployment allowance and vocational training for physically disabled employees.


  • From Employers: Calculated as a percentage of the total wages paid to employees.
  • From Employees: Deducted directly from the employee’s salary.


  • Governed by the Employee State Insurance Corporation (ESIC).
  • Managed through a network of ESIC hospitals and dispensaries.


  • Employers must register within 15 days of becoming eligible.
  • Employees are automatically enrolled upon employment.

Claims Process

  • Claims must be submitted through prescribed forms.
  • Benefits are disbursed directly to beneficiaries or through banks.

Dispute Resolution

  • The ESI Act provides mechanisms for the resolution of disputes and grievances.
  • Employees can appeal decisions regarding benefits and contributions.

Compliance and Penalties

  • Strict penalties for non-compliance with the ESI Act, including fines and imprisonment for employers.
  • Regular inspections and audits ensure adherence to the scheme.

Recent Amendments and Updates

  • Periodic updates to contribution rates, benefit amounts, and eligibility criteria.
  • Expansion of coverage to include new categories of workers and industries.

Challenges and Criticisms


  • Accessibility of Medical Services: The limited geographical distribution of ESIC hospitals and dispensaries is a significant challenge. It makes it difficult for many beneficiaries, especially those in rural or remote areas, to access medical services.
  • Quality of Healthcare: Reports of poor medical care at some ESIC facilities have surfaced due to inadequate infrastructure, staff shortage, and lack of essential medicines and equipment, causing dissatisfaction among beneficiaries.
  • Delays in Benefits Disbursement: Delays in processing and disbursing claims for scheme benefits can cause financial distress for employees and their families, particularly during medical emergencies or when relying on benefits for daily expenses.
  • Complexity and Bureaucracy: ESI scheme processes are criticised for being complex, leading to delays and increased grievances for employees and employers.
  • Inadequate Awareness and Information: Workers must be fully aware of the benefits available under the scheme, resulting in underutilisation and failure to realise their entitled benefits.
  • Financial Sustainability: ESIC’s financial sustainability is challenging due to the increasing burden of providing comprehensive benefits to a growing workforce.


  • Coverage Limitations: According to critics, the Social Security scheme’s wage threshold excludes many higher-income workers who could still benefit from coverage. Moreover, the scheme does not include informal sector workers, who comprise a significant portion of India’s workforce.
  • Service Disparities: There is a perception of unequal service quality across different ESIC facilities, causing some beneficiaries to feel like they are receiving a different level of care than others.
  • Efficiency and Responsiveness: ESIC’s efficiency and service delivery have been criticised for slow technological adaptation and lack of proactive measures.
  • Engagement with Private Healthcare Providers: ESIC has partnered with private healthcare providers, but monitoring and quality assurance concerns remain. Improvement is needed in coordination between ESIC facilities and private partners.
  • Policy and Implementation Gaps: ESI scheme policies and their implementation may not align, leading to inconsistencies in benefit delivery.

Future Directions

Expansion of Coverage

  • Broader Geographic Reach: Extend ESIC to rural and remote areas for more comprehensive coverage.
  • Inclusion of Informal Sector Workers: Inclusion of informal sector workers in ESIC.

Enhancement of Benefits

  • Upgrading Medical Facilities: Upgrading healthcare facilities with modern infrastructure, equipment, and technology.
  • Broadening the Scope of Benefits: New and existing benefits are enhanced to cover health and welfare needs, including mental health and disability support.

Digital Transformation

  • Online Services: IT is high time that a digital platform is created for the scheme’s administration, with online registration, claim submission, and tracking; this will enhance efficiency and transparency.
  • Digital Health Records: Using EHRs to streamline healthcare delivery and ensure continuity of care.

Financial Sustainability

  • Revised Contribution Structure: Adjusted contribution structure and rates for ESIC’s financial sustainability without compromising affordability for employers and employees.
  • Efficient Fund Management: Manage ESIC funds sustainably with intelligent investments and cost control.

Stakeholder Engagement

  • Enhanced Employer and Employee Engagement: Increasing engagement with employers and employees to improve compliance and resolve grievances effectively.
  • Partnerships with the Private Sector: Strengthening partnerships with private healthcare providers to improve medical services for beneficiaries.

Policy and Legislative Reforms

  • Updating the ESIC Act: Amending the ESIC Act to reflect changing labour market dynamics, technology advancements, and emerging health challenges.
  • Harmonisation with Other Social Security Schemes: Efforts are being made to integrate ESIC with other social security schemes to ensure comprehensive coverage and minimise overlaps.

Quality Assurance and Beneficiary Satisfaction

  • Quality Standards for Healthcare Services: Ensuring high-quality medical care through strict standards and regular ESIC/partner healthcare facility audits.
  • Focus on Beneficiary Experience: Improving beneficiary experience through better service quality, shorter wait times, and efficient grievance redressal.

Research and Development

  • Data-Driven Decision Making: Using data analytics and research to inform policy decisions, improve areas, and track impact on beneficiaries’ health and welfare.
  • Innovation in Service Delivery: Promoting new service delivery methods such as telemedicine and mobile health units to improve healthcare accessibility.

This overview and detailed bullet points comprehensively summarise the Employee State Insurance Scheme, its rules, and essential extracts from the act. helps register the eligible entities and then manages them for ongoing compliance.