ESI Deduction and Gratuity Process Clarifications - Comprehensive Insights

Dear All,

I have one query on ESI deduction. If an employee's gross salary is Rs. 11,100, should ESI be deducted or not? In this case, the basic salary should be Rs. 10,000. Please help me.

Thanks,
Suman🌟

Hi Suman,

ESI is always calculated based on gross salary only. Therefore, if the gross salary is more than 10,000, there is no need to deduct ESI. For example, even if the gross salary is 10,001, ESI does not need to be deducted.

Dear Suman,

Siharsha is right; it falls under the ESI Act, which is the latest amendment. Previously, it was set at 7500/-. However, ensure that ESI does not apply to the Uniform Maintenance Allowance. If your company provides uniforms to your employees, you can categorize it as "uniform maintenance allowance or washing allowance," and ESI does not apply to this category. For example, if the gross salary is 10500/- and it includes 1000/- as UMA or WA, then the employee is covered under ESI.

Thanks,
Navneet Singh
Gurgaon

Hi, Friend,

COVERAGE UNDER THE ESI ACT, 1948

The Act was originally applicable to non-seasonal factories using power and employing 20 or more persons; but it is now applicable to non-seasonal power-using factories employing 10 or more persons and non-power-using factories employing 20 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatre, road motor transport undertakings, and newspaper establishments employing 20 or more persons.

The existing wage limit for coverage under the Act is Rs. 10,000 per month (with effect from 1.10.2006).

ESI will be calculated on the gross salary only up to Rs. 10,000. An employee is eligible for ESI. If he/she earns more than Rs. 10,000, they will not be eligible for ESI.

For example, if an employee earns Rs. 10,001, he/she will not be eligible for ESI.

I think your doubts have been cleared.

Warmest Regards,

Mohan M.S

Dear Mr. Suman,

The maximum limit for ESI coverage is Rs. 10,000, which includes Gross Salary and allowances such as Overtime, Washing, and Traveling. If the gross salary exceeds Rs. 10,000, ESI should not be covered or deducted.

The deduction for ESI is 1.75% of Gross Salary as the Employee's share, and the Employer also contributes 4.75% of the same.

Thanks & Regards,
G. Ramanadhan

Hi,

We are newly established in the Pune area. We have recently appointed some operators to our company's permanent payroll. I have some queries regarding Gratuity:

- What is the process for Gratuity?
- Where should the Nomination Form be submitted?
- Is there any specific code we need to obtain?
- If yes, what is the process for obtaining it?
- How should the Gratuity Amount be deposited?

I require your valuable information. You can email me at "rajeshpatil@pricol.co.in"

Thanks,
Rajesh Patil
9850037870

Hi Rajesh,

Gratuity is payable after completion of five years. It is 15 days of every completed year of service. As per what I know, there is nothing called a code, etc. After completion of one year, you have to get the nomination filled out by the employee. There is one more option, which is you can opt for the LIC gratuity scheme. You can inquire with LIC. That is also a good scheme.

Regards,
Rajeev Dixit
09901436213

Hi,
We are newly established in Pune area. We are newly appointed some operators on our company roll. I.e. Permanent. I have some queries regarding the Gratuity-
What is the process of Gratuity?
Where to submit there Nomination Form?
Is there any code we have to take?
If Yes? What is the process for it?
How to deposit Gratuity Amount?
I required your valuable information. You can mail me at “ [IMG]https://www.citehr.com/misc.php?do=email_dev&email=cmFqZXNocGF0aWxAcHJpY2 9sLmNvLmlu[/IMG]”
Thanks
Rajesh Patil
9850037870

Hi Suman,

ESI is not applicable where the gross salary is more than ₹10,000. However, there is an exception to the above. As you are aware, there are two contribution periods: from April to September and another from October to March.

So, an employee whose salary is below ₹10,000 but due to a salary increase, if his salary exceeds ₹10,000, he is liable to pay ESI contribution till the end of the respective contribution period, either till September or March as the case may be.

Hope this is clear. Thanks for giving me the opportunity to clear your doubts. Have a great day.

R. Sreenivasan

Hi Suman,

Depending on the salary structure of your organization, can one comment about ESIC deduction, i.e., how gross of Rs. 11,100 is broken up in the salary structure? Reimbursements like LTA or Medical in a salary structure are not to be considered for ESIC.

Thus, if you can shed light on your salary structure, we will be in a better position to discuss ESIC deductions.

Regards,
Deepa

Dear Navneet,

Here, what you said is wrong. If an employee's salary is 10500, he is not eligible for ESI. If an employee's salary is 9500, then he is an eligible candidate. If you have given 500 as Washing or Uniform allowance, you can calculate the ESI amount based on 9000 only.

Note: If any employee is covered under ESI, then you can deduct the washing allowance from the Gross salary. If an employee's salary is 10500, and he is not an ESI candidate, you do not need to deduct 500, and there is no need to pay ESI.

For those people who are covered under ESI, you can pay ESI contribution without the washing allowance. In your example, the person with a salary of 10500 is not covered under ESI.

I am Shyam Sooraj. I am having some confusion related to gratuity calculation. Can you help me to figure out this dilemma?

Thank you.

Dear All,

Thanks for your replies. I have discussed these points with my management, but they said if the gross salary is 11100, then the basic salary should be 10000 Rs. If the basic salary is 10000 Rs., then PF amount and bonus amount will increase. Seniors, please suggest what we should do in this case.

Suman :icon1:

Dear Suman,

The story of ESI deduction does not end here, as has been opined by some of our friends. Please note that there are two contribution periods in a year. Now, if in the first month of the starting of any contribution period, the gross salary is > than Rs. 10,000/-, there will be no deduction of ESI contribution. Now, if at any point of the next remaining contribution period, in any particular month, the salary is < than Rs. 10,000/-, ESI deduction will have to be made and continue for the rest of the contribution period - despite his salary again going above Rs. 10,000/-

In brief, once deduction starts at any time during a contribution period, it will continue till the end/expiry of the contribution period (of 6 months).

D.K. Moitra Kolkata.

Hi,

ESI will not be applicable to those employees whose gross salary (except washing allowance) is more than 10000/-. However, if an employee is working on our premises and their salary is less than 10000/-, you should increase their salary to more than 10000/- during the contribution period of ESIC (Contribution periods are 1) Apr to Sept and 2) Oct to March). This means in May to Sept or Nov to March, you are liable to deduct their ESIC up to the end of the contribution period, whether their salary is more than 10000/-.

You can be exempt if you make the increase effective from a back date.

For example, Mr. Ramesh is working in your establishment, and his gross salary is 9500/-. He is an employee under the ESIC act. If in the month of May or November, the company gives him an increment of Rs. 1500/-, his gross salary will then be 11000/-. Despite this increase, he is still liable to pay contributions on his gross salary up to September or March. However, you may grant him an exemption if you give him the increment retroactively from April or October.

Dear,

If the gross is 11100 and the basic is 10000, with an additional 1100 as Overtime allowance, then that employee is coverable under ESI, and necessary deductions must be made.

BYE,
Ramesh

Dear Rajesh,

Please find the enclosed file of the Gratuity PPT. I think it will clear all your doubts.

Have a great day!

Warmest Regards,
Mohan M. S

Dear Mr. Ramesh,

If any employee is covered under the ESI Act and is paying ESI contributions, then if they are earning a gross salary of more than 10,000, including overtime, they are liable to pay ESI. For example, if Mr. X has a gross salary of 10,000 and also receives overtime pay of 1,100, then he has to pay ESI contributions. It's important to note that overtime pay is not considered wages under the ESI Act.

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Hi Suman!

See, there is another issue with this. It's quite right that 10000/- is the ceiling for ESI, and employees getting a salary above the ceiling can't get ESI membership. BUT...

If someone's salary is increased from :icon13:<10000/- to :icon13:>10000/-, then ESI deduction will continue till September/March. During this period, memberships are not subtracted. Meanwhile, ESI will be deducted from the total gross salary, whether it is 20000/-.

Regards,
Jenender Chawla

Dear Friends,

I need clarification about the applicability. In an organization of 20 employees, if only 5 employees' gross salary is less than 10,000/-, is ESI applicable to the organization? I would appreciate your views as per the ESI Act.

Regards,
Bhavan