Struggling with Salary Fitment? How to Handle Circular References in ESI Calculations

Hi,

As per the ESI Act, it is calculated on the gross amount. To arrive at the gross amount, various pay elements are considered such as Basic, HRA, Conveyance, and Special pay (balancing figure after allocating the amount in other pay elements), etc. Since PF, ESI, and Gratuity are calculated after gross salary, and ESI is calculated on gross, I am encountering a circular reference while preparing the salary fitment in the spreadsheet.

Can anybody guide me on how to arrive at gross earnings as Special pay is the balancing figure?

I would appreciate an early response.

Thanks,
Nikita

Hi Niki,

First of all, ESI is deducted from the gross amount, and in the gross amount only the basic and DA come; other heads come thereafter depending on your earnings and deduction heads. At the end, whatever amount you will get will be your net payable amount, which includes all earnings like HRA, Conveyance, Special Pay, and deduction heads like security, etc.

I hope you are clear now. For any help, keep in touch.

Ratikanta Rath (H.R)

Dear ESI is deducted from your gross salary, which includes basic, HRA, conveyance, special pay, special allowance, etc.

Thanks,
J. S. Malik

Dear,

ESI is applicable on all heads that appear on your salary/wage slips and are paid on a monthly basis. This applies to employees who draw a gross monthly salary of less than Rs 10,000.

Thank you.

Mr. Mallick, if we are deducting our PF from basic, not including HRA, special allowance, etc., then why is ESI not deducting from only basic? Any changes in the rule, then guide me.