Why we have to deduct esi

PF ESI deductions are retirement benefits to employees as it will get deducted and after retirement accumulated balance can be reimbursed to employees

In March 1943, Prof. B.P.Adarkar was appointed by the Government of India to create a report on the health insurance scheme for industrial workers.[2] The report became the basis for the Employment State Insurance (ESI) Act of 1948.[2] The promulgation of Employees’ State Insurance Act, 1948 envisaged an integrated need based social insurance scheme that would protect the interest of workers in contingencies such as sickness, maternity, temporary or permanent physical disablement, death due to employment injury resulting in loss of wages or earning capacity. The Act also guarantees reasonably good medical care to workers and their immediate dependents. Following the promulgation of the ESI Act the Central Govt. set up the ESI Corporation to administer the Scheme. The Scheme thereafter was first implemented at Kanpur and Delhi on 24 February 1952. The Act further absolved the employers of their obligations under the Maternity Benefit Act, 1961 and Workmen's Compensation Act 1923. The benefits provided to the employees under the Act are also in conformity with ILO conventions. [3]:1
The act was initially intended for factory workers but later became applicable to all establishments having 10 or more workers.

As per ESI portal, ESI is a social insurance scheme to protect the interest of workers in contingencies such as sickness, maternity, temporary or permanent physical disablement, death due to employment injury resulting in loss of wages or earning capacity. It also guarantees reasonably good medical care to workers and their immediate dependants.

ESI is analogous to health insurance and contributions are like premium for health insurance.

Note: ESI contributions are not similar to retirement funds like PF/NPS etc.