The government has reduced the contribution under the Employees’ State Insurance (ESI) Act to 4% from 6.5%, a move expected to increase the take-home salary of workers as well as reduce the financial burden of employers. The decision will benefit 36 million workers and 1.28 million employers.

ESIC contribution rates (Reduced w.e.f. 01/07/2019) 

ParticularsOld Contribution Rate
New Contribution Rate
Employer Share4.75%3.25%
Employee Share1.75%0.75%

“The reduced rate of contribution will bring about a substantial relief to workers and will bring more and more workforce into the formal sector,” the ministry said.

Similarly, it said, a reduction in the share of contribution of employers will reduce the financial liability of the establishments, leading to improved viability of these establishments, and also lead to enhanced ease of doing business.

The ESI Act 1948 under the labour ministry covers employees with salary up to Rs 21,000. Aiming to increase the country’s formal workforce, the government had raised the wage ceiling in December 2016 to Rs 21,000 from Rs 15,000.

The government’s move to raise the wage ceiling for coverage under the scheme has resulted in an increase in enrolments under the scheme.

The rate of contribution will be calculated on the employee Gross Salary up to Rs. 21000/- Only.


If employee Gross Salary is Rs. 18000/-, then ESIC Contributions of both Employer and Employee are,

    Employer Contribution =  Employee Gross Salary*3.25% (18000*3.25% = 585/-)


    Employee Contribution = Employee Gross Salary*0.75% (18000*0.75% =  135/-)

Note: There is no ESIC Contribution for above Rs.21000/- salaried employees.