Shall We Deduct ESI Contibution From Incentive Also? - CiteHR
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Hai all, pls help me. we are paying incentives to our employees. shall we deduct ESI contibution from incentive also? is it mandatory? expecting valuable advice. Thanks n regards Jossy Justin
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E.S.I. Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Corporation in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time. Currently, the employee’s contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employer’s is 4.75% of the wages paid/payable in respect of the employees in every wage period. Employees in receipt of a daily average wage upto Rs.50/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.
Collection of Contribution
An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 21 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf.
Contribution Period and Benefit Period
There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.
Contribution period Corresponding Cash Benefit period
1st April to 30th Sept. 1st January of the following year to 30th June.
1st Oct. to 31st March 1st July to 31st December of the year following


Thanks Madhu,
Pls guide me, for the payment to employes other than there salary or wages, like festival allowance, profit sharing, bonus etc. shall we taken it for esi calculation?
Thanks n regards
ESI is applicable only to the payouts that appear on your monthly paystub and applicable upto and including Rs.10,000/- Gross per month. If you want to add up all the other x,y,z incentives received by other means, then the total salary would sometimes cross the ceiling and applicability may not arise. So only your payslip figure is eligible for ESI.
dear incentive will attract contribution towards ESI if it is paid every month. tks j s malik
Dear All, Please find enclosed attachment for your perusal. Best of luck,

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File Type: doc ESI Notes.doc (46.0 KB, 1004 views)

Incentives paid at interval of 3 months will not attract ESI contribution. However if paid monthly then ESI contribution is to be paid on the incentives subject to that the total does not cross Rs.10000/- pm
Anastasio J Colaco
Dear Jossy Justin,
Since you have not mentioned the interval of payment of Incentive therefore, I am producing here the rule that allowances, incentive, profit sharing etc. whatever nomenclature, if being paid on regular monthly basis and Gross up to Rs. 10000/- will be coveable under the Act and Contribution has to be deducted and deposited.
Any allowance, Incentive etc. being paid more than the interval of two months is exempted to consider the wages for E.S.I. contribution.
I would suggest you to check if on adding said incentive with the monthly salary comes out more than 10000/- then show it on wage register on monthly basis, then your employees automatically become exempted from E.S.I. purview, other wise pay it on quarterly basis so that the amount of incentive will be exempted from E.S. I. contribution.
Mohd. Arif Khan
Dear Friend,
Generaly ESI is deducted at monthly gross salary and if you are paying incentives monthly you have to deduct esi otherwise you can pay incentives quartery or half yearly to ge exemption from deducting esi.
With regards
hi all
i m iqbal channa from ludhiana(pb). i am consultant of esi,epf,shop & commercial act and labour laws if you any problem for above said plz tell me or call me.
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