Managing the Employees' State Insurance (ESI) contributions for a pay group

Introduction

Employees' State Insurance (ESI) is a statutory benefit in India that provides health coverage to workers. ESI contributions are mandatory for employees earning a monthly gross salary of less than ₹21,000, or those already part of the contribution cycle.

This guide shows you how to manage ESI settings for a specific pay group in Keka, including how to enable or disable ESI, and how to control whether the employer’s contribution is included in the employee’s annual salary or displayed on payslips.

Default Rates:

• Employee contribution: 0.75% of gross salary

• Employer contribution: 3.25% of gross salary
  The contribution is usually calculated on a capped gross salary of ₹21,000.

Important: Make sure to remain compliant with statutory requirements when enabling or disabling ESI for any pay group.

To manage the ESI contributions for a pay group

Open Pay Group Settings

1. Go to Payroll from the left menu.

2. Click Settings.

3. In the Pay Groups tab, find the pay group you want to configure.

4. Click the Configure icon next to the pay group.
   
   

Access ESI Settings

1. In the Pay Group Configuration window, go to the Contributions tab.

2. Click the three dots menu on the right.

3. Select Update ESI Settings from the dropdown.
   
   

Edit ESI Settings

1. In the Employee State Insurance Settings window, use the toggle switch at the top to turn ESI on or off for the pay group.

Options & Variants

Employer Contribution Settings

You can choose how the employer’s ESI contribution is handled in salary calculations:

• Option 1: Excluded from annual salary
  Select:
   No. Employer's contribution of ESI is paid by employer, over and above the Annual Salary of an employee
  Use this if the contribution is additional and not part of the CTC.

• Option 2: Included in annual salary
  Select:
   Yes. Employer's contribution of ESI forms a part (and is deducted) from Annual Salary of an employee
  Choose this if the contribution is considered part of the employee’s CTC.

  • You can also hide this amount from payslips:
    Hide Employer's contribution of ESI from Payslip