Understanding ESIC Deduction and Documentation Process

Dear All,

My query is regarding the ESI amount deduction from an employee's salary. If an employee whose salary is Rs. 9500/- per month and we increase his salary to Rs. 11000/- per month, then at what amount should we deduct the ESI - on Rs. 10000 (fixed amount) or Rs. 11000? Please revert on an urgent basis.

Thank you,
Anu

ESI ceiling limit is Rs. 10,000. If the salary exceeds this limit, we should stop ESI deduction. :icon1:

Dear all,

If you have increased the salary to 11000, then in between you cannot stop the deduction, and you are required to deduct ESI on 11000. You can stop the deduction in the salary of April and October every year. Our return cycle is from October to March and April to September. After the completion of this cycle, you can stop the deduction, but in between, you cannot.

Regards,
J.S. Malik

I'm working in a BPO organization, and I know that the labour welfare fund is being deducted half-yearly for some states like Mumbai, Delhi, Kerala, Kolkata, etc., both monthly and yearly. Could you please help me with regard to the half-yearly slabs for which employees are eligible for deductions? Additionally, if you could provide me with the relevant notifications, that would be greatly appreciated.

Dear Anu,

ESI contribution periods are (Oct to Mar) & (Apr to Sep). If salary is increased between the contribution period, then the deduction will be made on the full salary, i.e., 11000 up to the completion of the contribution period. After the completion of the contribution period, there will be no deduction of ESI contribution.

Thanks and regards,

RAJESH KHATTAR
(ESI & PF Consultant)
Muskan Consultancy Services
Email: mcs.rajeshkhattar@gmail.com

Dear Anu,

I do agree with Mr. Rajesh Khattar. What is said is correct. The contribution is between April to September, and from October to March. When an employee falls under the ESI ceiling during the contribution period, even if he crosses the ceiling of Rs. 10,000/-, you have to pay on the gross amount except for washing allowance, if any. You can stop the deduction either in the month of October or April. You have to send a report to the ESI Local office about the cessation of the member from the scheme.

Thanking you,

G.K. Manjunath

Hi,

We all know that employees who are drawing more than Rs. 10,000/- salary per month, other than conveyance (regular payment), do not need to pay ESI contributions. Those who are earning less than Rs. 10,000/- will be covered under ESI.

Suppose an employee is drawing a gross salary less than Rs. 10,000/- per month (regular payment as per the appointment order) at the beginning of the contribution period (from April 2009 to September 2009) and is earning Variable Incentive, Production Bonus, Overtime, and Shift allowance separately in the same month. ESI contributions (1.75%) must be deducted from his total earnings.

In the middle of the contribution period, between April 2009 and September 2009, he received an increment and his gross salary increased to Rs. 11,200/- per month as regular payment, apart from earnings like Variable Incentive, Production Bonus, Overtime, and Shift allowance.

Although he is now drawing more than Rs. 10,000/- per month (regular payment after the increment), the employer must deduct ESI contributions on the total gross amount and earnings like Variable Incentive, Production Bonus, Overtime, and Shift allowance until the end of the contribution period. Deductions can be stopped from the next contribution period onwards.

Example of one employee's gross and other earnings, ESI deductions per month are as follows:

Month | Basic | HRA | FI | Other Allowance | Gross | VI | PB | OT | SHA | TG | ESI Cont. (1.75%)

Contribution period from April 2009 to September 2009

April | 5000 | 1500 | 500 | 1000 | 8000 | 0 | 1000 | 900 | 150 | 10050 | 176

May | 5000 | 1500 | 500 | 1250 | 8250 | 0 | 1000 | 400 | 150 | 9800 | 172

June | 7000 | 2100 | 0 | 2100 | 11200 | 673 | 600 | 600 | 200 | 13273 | 233

July | 7000 | 2100 | 0 | 2100 | 11200 | 591 | 300 | 600 | 175 | 12866 | 226

August | 7000 | 2100 | 0 | 2100 | 11200 | 306 | 200 | 400 | 100 | 12206 | 214

September | 7000 | 2100 | 0 | 2100 | 11200 | 579 | 200 | 300 | 175 | 12454 | 218

Contribution period from October 2009 to March 2010

October | 7000 | 2000 | 500 | 2350 | 11850 | 0 | 600 | 400 | 150 | 13000 | 0

November | 7000 | 2000 | 500 | 2350 | 11850 | 0 | 600 | 400 | 150 | 13000 | 0

December | 7000 | 2000 | 500 | 2350 | 11850 | 0 | 600 | 600 | 200 | 13250 | 0

January | 7000 | 2000 | 500 | 2300 | 11800 | 0 | 200 | 400 | 100 | 12500 | 0

February | 7000 | 2000 | 500 | 2300 | 11800 | 0 | 200 | 300 | 175 | 12475 | 0

March | 7000 | 2000 | 500 | 2350 | 11850 | 0 | 600 | 400 | 150 | 13000 | 0

In addition, ESI contributions must be made from an employee's payment of EL encashment by applying the above condition. The ESI contributions and payment details of EL encashment should be submitted to the ESIC Corporation along with the half-yearly returns (Form 6) submission.

Any amount over one paisa in the calculation of contributions should be rounded off to a rupee.

Acronyms

VI: Variable incentive; It is variable in nature, hence, not considered as a salary component.

PB: Production Bonus; One month you may get. Another month you may not get. Not in regular nature, hence not considered as a salary component.

OT: Overtime; Same as above.

SHA: Shift Allowance; Generally, those who are attending night shift will be paid a shift allowance. It is also not a regular monthly payment, hence not considered as a salary component.

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Hi, folks

We all know that, employees who are drawing more than Rs.10000/- salary per month other than conveyance (regular payment) need not to pay ESI contribution.

Suppose, an employee is drawing gross salary less than Rs.10000/- per month (regular payment as per appointment order) in the beginning of the contributions period (from April 2009 to September 2009) and earning Variable Incentive, Production Bonus, Over time, Shift allowance separately in the same month. ESI contribution (1.75%) must be deducted from his total earnings.

In the middle of the contribution period ie., between April 2009 and September 2009, he got an increment and fetched to Rs.11200/- gross as regular payment per month apart from earnings like Variable Incentive, Production Bonus, Over time, Shift allowance. In such a case, employer must deduct ESI contributions on total gross + earnings like Variable Incentive, Production Bonus, Over time, Shift allowance till the end of contribution period. Deduction can be stopped from next contribution period onwards.

Example one employee gross and other earning, ESI deductions per month as follow:





Apart from the above, ESI contributions must be made from employee’s payment of EL encashment by applying above condition. The ESI contributions and payment details of EL encashment should be submitted to the ESIC Corporation along with the half – yearly returns (form 6) submission.

Over and above one paisa in calculation of contributions should be rounded off to a rupee.

Acronyms:

VI: Variable incentive; FI: Fixed Incentive; PB: Production Bonus; OT: Over Time; SHA: Shift Allowance; OVP: other variable payments; TG: Total Gross; ESI Cont: Employee’s State Insurance Contribution

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Hi Anu,

If the salary increases above 10,000 PM, then the employee is not eligible for ESI deduction. However, when the salary is increased after the starting of the contribution period, i.e., April to September and October to March, then the ESI has to be deducted until the contribution period ends.

I hope I have clarified this. For any further clarification, please revert to me.

Thanks,
Mani
9818583320

Dear All,

My query is regarding the ESI amount deduction from employees' salaries. As per the new amendment in ESI slabs, the range is from 10K to 15K. In my organization, a lot of my employees are getting a salary between 10100 to 15000. The ESI ceiling was amended with effect from 1st May 10. However, the ESI Return cycle is from Oct to March and April to Sept. Therefore, in the month of April, all my employees are not under ESI. In the case we referred to earlier, in increments from 9500 to 11000 up to the end of the Return cycle, we need to deduct. Does this mean that we are required to deduct ESI from my employees until September?

Please reply.

Thanks,
Krishna

I think the ESI is to be deducted for those who draw a salary up to ₹15,000/- according to the new amendment.

Dear friends,

I think according to the new amendment, the ESI is to be deducted for those who earn up to 15k. Please check.

Dear All,

ESIC is deducted on Gross Salary of up to Rs. 15,000 per month. Employees earning a salary above Rs. 15,000 per month are exempted from the scheme.

There are two contribution periods of six months' duration each in a year, in respect of an insured employee, with a corresponding benefit period of six months each - i.e., April to September and October to March of the following year.

If an employee's salary is incremented in between any contribution period and exceeds Rs. 15,000 per month gross, then the ESIC contribution would be on the whole of the incremented salary. However, if an employee's salary is incremented at the beginning of any contribution period and exceeds Rs. 15,000 per month gross, then they are exempted from ESIC.

Example 1:

An employee's current salary is Rs. 12,000 gross per month. Upon an increment effective from May to Rs. 16,000 per month, ESIC is contributed on Rs. 16,000 until September. From October, the employee is exempted.

Example 2:

An employee's current salary is Rs. 12,000 gross per month. Upon an increment effective from April or October to Rs. 16,000 per month, ESIC contribution ceases from April or October onwards.

No ESIC contribution is deducted thereafter. I hope this clarifies the queries. Let me know if you need further clarification.

Hello All,

Please help me. My company deducts the whole amount of ESI from my salary, saying that it's a government rule. But as per my knowledge, it's a 1.75% deduction from the employee's salary. Could you please let me know if there is any new rule created in India [that the whole amount will be paid by the employee only] or any new government form designed? My company is a Pvt. Ltd. company, and they also do not provide facilities for PF. In the past, they had us sign a form stating that if we did not sign it, then the whole PF amount would be deducted from our salary.

Please guide me.

Thanks

Hi Ritu,

I have a query regarding the deduction of ESI from incentives. I am working in the automotive sector under a dealership. My gross salary exceeds the ESI slab limit of Rs. 15,000. Currently, I am not eligible for ESI deduction. However, my employer has now implemented a rule stating that approximately 6.5% will be deducted from my earned incentives, in addition to TDS. No deductions have been made from my salary thus far.

Could you please help me understand this new policy?

Thank you,
Ritu