Is ESI calculated on basic or gross salary?

On gross wages — unlike EPF, which uses basic plus DA. That is why the same employee can be over the ESI limit but still fully within EPF.

What are the current ESI contribution rates?

0.75% of gross wages from the employee and 3.25% from the employer.

What happens when salary crosses ₹21,000?

The employee generally continues contributing until the current contribution period ends, then exits coverage from the next period.

How ESI is calculated and who it covers

ESI (Employees' State Insurance) applies to employees earning gross wages of ₹21,000 or less per month. The employee contributes 0.75% of gross wages and the employer contributes 3.25%, both computed monthly and remitted to ESIC with a contribution return.

The ₹21,000 eligibility line

Coverage is determined by gross monthly wages: at or under ₹21,000, ESI applies. On ₹18,000 gross, the employee's deduction is ₹135 (0.75%) and the employer accrues ₹585 (3.25%). Because gross moves with loss of pay and components, eligibility should be re-evaluated every month, not set once.

Contribution periods matter

ESI operates in contribution periods; an employee who crosses ₹21,000 mid-period generally continues contributing until the period ends. Payroll software should carry the coverage decision consistently rather than flipping mid-cycle arbitrarily.

How Flocci Work Suite does it

The ESI engine checks each employee's gross against the ₹21,000 limit on every payroll run, applies 0.75%/3.25% with decimal-safe arithmetic, and the finalized run exports the ESIC return file for the portal.

Frequently asked questions

Is ESI calculated on basic or gross salary?: On gross wages — unlike EPF, which uses basic plus DA. That is why the same employee can be over the ESI limit but still fully within EPF.
What are the current ESI contribution rates?: 0.75% of gross wages from the employee and 3.25% from the employer.
What happens when salary crosses ₹21,000?: The employee generally continues contributing until the current contribution period ends, then exits coverage from the next period.

Keep reading

Statutory rules summarized as of 2026-07-29. Rates and thresholds change — always confirm against the current EPFO, ESIC and Income Tax department notifications before filing.