Hi,
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. Those who are earning less than Rs.10000/- will be covered under ESI.
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.
Though, he is drawing more than Rs.10000/- per month (regular payment after increment), 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:
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
Aug 7000 2100 0 2100 11200 306 200 400 100 12206 214
Sep 7000 2100 0 2100 11200 579 200 300 175 12454 218
Contribution period from October 2009 to March 2010
Oct 7000 2000 500 2350 11850 0 600 400 150 13000 0
Nov 7000 2000 500 2350 11850 0 600 400 150 13000 0
Dec 7000 2000 500 2350 11850 0 600 600 200 13250 0
Jan 7000 2000 500 2300 11800 0 200 400 100 12500 0
Feb 7000 2000 500 2300 11800 0 200 300 175 12475 0
Mar 7000 2000 500 2350 11850 0 600 400 150 13000 0
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; It is variable in nature, hence, not considered as salary component
PB: Production Bonus; One month you may get. Other month you may not get. Not in regular nature. Hence, not Considered as salary component
OT: Over Time; as same as above
SHA: Shift Allowance; Generally, those who are attending night shift will be paid shift allowance. It is also not
regular monthly payment. Hence, not considered as salary component