As per government rules, ESI is a mandatory contribution made by the employer and employee towards the employee. The rates are revised from time to time. Currently, the employee's contribution rate (w.e.f. 01.07.2019) is 0.75% of the wages and that of employers' is 3.25% of the wages paid/payable to the employees in every wage period. Employees who have a daily average wage up to Rs.137/- are exempted from payment of contribution. Employers must however contribute their share for these employees. The ESI contribution period or ESI Cycle is divided into two parts for a financial year:
- 1st April to 30th September.
- 1st October to 31st March.
Due to a revision in employees' gross salary, employees' stop being eligible for ESI in the middle of a financial year. In such cases, the deduction of ESI is done for the complete cycle in which employee was eligible for ESI. For example, the employee gets a salary revision in August. As per ESI cycle, ESI deduction will be done till September. ESI deduction will stop from the next ESI cycle i.e. October.