7 common ESI mistakes, and how to fix them

1. Thinking ESI starts at 20 staff

ESI applies with 10 or more staff, in every state.

The fix: count your staff the right way (see below). ESI starts at 10. Use our free ESI eligibility checker, or read ESI: who must register.

For some risky kinds of work, ESI can apply even with 1 employee. Call us to check.

2. Counting your staff wrongly

Casual staff, staff sent by a contractor, staff who earn above ₹21,000 a month (the ESI wage limit) all count towards the 10. Paid directors who work in the business? Call us to check how to count them. Apprentices, the owner and the partners of a partnership firm don't.

The fix: count everyone who counts.

3. Using the full pay instead of ESI wages

ESI wages are not the full pay. Some pay is left out, such as house rent allowance (HRA) and overtime. But ESI wages must be at least half the total pay. If they come to less, the difference is added to ESI wages.

The fix: calculate ESI wages for each person before you check the ₹21,000 limit. Try our free ESI contribution calculator.

4. Skipping your share for low-paid staff

Staff on very low daily pay don't pay the employee share (0.75%). You still pay your share (3.25%).

The fix: you still pay your 3.25%. Call us and we will check each person.

5. Stopping ESI too early

When pay goes above ₹21,000, it is easy to get this wrong.

The fix: don't stop on your own. Call us to check when ESI can stop for that person.

6. Paying after the 15th

ESI is due by the 15th of the next month. Pay late and you owe interest, and you may also owe damages (a fine).

The fix: pay before the 15th, with a few days spare. Read what paying ESI late costs.

7. Not adding new staff from day one

Each covered employee needs an IP number (the employee's ESI number).

The fix: add each new employee when they join, or before, if the rules cover them. We create IP numbers on the ESIC portal for our clients. Read what happens in an ESI inspection.