ESI (Employees' State Insurance)

It provides medical care, sickness benefit, maternity benefit, disablement benefit and dependants' benefit through the ESIC network, and it is compulsory for covered establishments rather than an insurance product an employer chooses.

Coverage is decided by the employee's wage against a statutory threshold, and the employer contributes a larger share than the employee. The contribution is computed on gross wages rather than on basic plus DA, which is the main structural difference from provident fund and the reason the two deductions move differently when a salary changes.

The rule that causes most payroll confusion is what happens when someone crosses the threshold mid-period. ESI operates in fixed contribution periods, and an employee already covered at the start of a period generally continues to be covered until the period ends, even after a raise takes them above the limit. Dropping them the month the raise lands is a common and consequential mistake.