ESI Contributions: Do You Need to Pay When Salary Fluctuates Above the Limit?

Dear Members,

Is it mandatory to pay ESI contributions for an employee if the Gross Salary crosses the specified limit?

Let me elucidate:

If an employee crosses the stipulated limit (currently Rs. 10,000) in February, April, June, August, and October, but for the rest of the year, her salary is below Rs. 10,000, is it mandatory to pay ESI contributions for February, June, and October?

Kindly provide your insights.

Regards,
SC

Hi,

There are two contribution periods, each of six months' duration, and two corresponding benefit periods, also of six months' duration, as follows:

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.

If any employee crosses the stipulated amount, i.e., Rs. 10,000 gross in the month of 1st April or 1st October, it is not mandatory to pay the ESI.

If any employee's salary crosses the stipulated amount, i.e., Rs. 10,000 gross between the contribution period (i.e., May, June, July, August, September, or November, December, January, February, March), it is mandatory to pay the ESI till the end of that particular contribution period.

Example:

An employee's gross is 7500 in the month of April. His gross has increased to 12000 in the month of June. From June onwards, it is mandatory to pay the ESI on the revised gross till the end of September (i.e., the end of the contribution period). From October onwards, it is not mandatory.

Regards,

SS

Hi,

Definitely, ESI is a mandatory scheme. It is a social security scheme from the Government of India. Regarding contribution, if an employee's salary increases in between the contribution period, then ESI has to be paid till the end of that contribution period. At the labor level of workers, ESI is most important to them for availing medical treatment, benefits, etc. Also, the management will be relieved from the responsibility of providing hospitalization during prolonged illness of an employee; the management can instruct the employee to seek treatment from ESI. Moreover, ESI will pay accident benefits, sickness benefits based on the employee's salary per day. Management need not pay their salary during their hospitalization period. Hence, ESI contribution is mandatory and a useful contribution for the company.

Regards,
R Devarajan