ESI Dilemma: Should I Deduct Contributions if Wages Exceed the Ceiling Mid-Period?

Hi, can anybody clear my doubt? If an employee is covered under the ESI Act and earning gross wages of Rs. 7500, and in the middle of the contribution period, his wages cross the ceiling limit (i.e., his wages increase to Rs. 10500), should I deduct the ESI contribution in respect of the employee for the remaining period of contribution? If it is necessary to deduct the contribution, in what amount do I have to deduct? Please give your opinion.

Hi,

Contribution has to be paid until the end of the six-month period, for example, September or March as applicable.

Regards,
AM

Hi,

Thank you for your response. I am still unclear about whether we should deduct the contribution based on his full wages or the ceiling wages (i.e., Rs. 10,500 or Rs. 7,500).

Hi Arasu,

You have to deduct the ESI contribution for the full contribution period. You need to pay the contribution on the increased wage, i.e., Rs. 10,500.00 in this case.

Hope it's clear.

Arasu

Hi,

If you don't have the notification from them, then go and take it, only then you will do it from 10,000/-, not from 10,500. Without the gazette, you cannot deduct from 10,000, so you have to continue the deduction at 7,500/-. The limit is 10,000/-. For more confirmation, ask any officer from the ESI office.

In my organization, we are still following the old procedure because the gazette has not been received.

Regards,
Divya

Hi,

As per the new amendment in the Employees' State Insurance Corporation (ESIC) Act, the existing wage limit for coverage under the Act is Rs. 10,000 per month (with effect from 1.10.2006). So, if the salary or wages of somebody are more than Rs. 10,000, he/she is no longer covered under this Act, and thus, no amount needs to be deducted from his/her salary from that month on.

Regards,
Satyam

As far as I know, the day his salary reaches even 10001, he is out of the bracket. So, you could stop the deduction from that month onwards.

Hi Satyam,

Yes, if the amount exceeds 10000/-, then no deduction. But again, I'll ask the same question... Did you get the letter of amendment from the ESI office or not? Don't start this until you get the gazette, okay?

Regards,
Divya

Hi,

Actually, the government has increased the limit of ESI from 7500 to 10000. Before last month, the limit was 7500, and now it is 10000. If he is getting a salary more than 7500 before and now getting 10500, in both situations ESI will be deducted.

ESI is deducted at 1.75% of the gross.

Regards,
Parveen

Hi,

As far as my knowledge goes, once an employee's salary exceeds the ESI limit of INR 10,000 (as per the new amendment effective from October 2006), the deduction is discontinued. No deductions will be made on the new or old salary.

Akshada

Hi Satyam,

Could you please provide a clear explanation along with the specified rules or section of the ESI Amendment Act in this regard? This will help us all understand it clearly and proceed with further action.

Regards,
A. Paulraj

Hi,

The monthly wage limit for coverage under the ESI Act would be as prescribed by the central government in the ESI (central) rules, 1950. The existing wage ceiling for coverage (excluding remuneration for overtime work) is Rs. 10,000 per month. An employee who is covered at the beginning of a contribution period shall continue to remain covered till the end of that contribution period, notwithstanding the fact that his wages may exceed the prescribed wage ceiling at any time after the commencement of that contribution period. The wage ceiling for the purpose of coverage is revised from time to time by the central government on the specific recommendation of the corporation. Currently, it has been increased to Rs. 10,000.

Please revert for further queries.

Regards.

Hi,

Could you please inform me about the section and/or subsection of the act that addresses the continuation of ESI deductions from an employee's salary after it has exceeded the ceiling limit?

Thank you.
Akshada

Hi Pracinno,

Thank you for your reply. However, I am still unclear on this topic. Could you please explain this topic in an easy way, providing a clear statement of the ESIC Rules?

I am looking forward to your response.

Paulraj

Friends,

Please note the following regarding this query:

1. The onus and accountability of the implementation of Labour Law are on the employer - whether or not you receive the intimation through the Gazette.

2. The ESI wage limit has been increased w.e.f. 1st October so that we can take appropriate action in advance - i.e., before the start of the contribution period.

3. There are two contribution periods - April to September and the other is October to March. For an employee whose ESI contribution is being deducted, and later the wages are increased in the middle of the contribution period, then the deductions and the contributions from the employer should continue till the end of the contribution period.
For example, if an employee is earning 7400 and the salary increases to 12000, the ESI deduction shall be on all of 12000.

I hope this makes things easier to understand.

Regards,
Ketan

Hi,

Can anybody help me out with this? How can ESI contributions be paid centrally for an organization that has branches in different states?

Thanks,
Akshada

Hi,

Very clearly, what I meant is that during a given contribution period, even if the wages increase, the contribution shall continue until the completion of that period irrespective of the increase, and the ceiling will be $10,000 (the maximum limit).

Dear ESI has to be covered, no doubt, up to 31st March 2007, upon Rs. 10,500. Because of the raise in the middle of the contribution period, even though it exceeds the ceiling amount of Rs. 10,000, the wages should be considered in total until 31st March 2007.

Regards, Narayana Murty

Notification was issued a while back, and ignorance of the law is not an excuse. Therefore, please discontinue if the salary is 10000 or above.

Cheers!

Hi all,

Can anybody please help me? I am still waiting for the answer to my query, i.e., "how can ESI be paid centrally by an organization that has branches in different states?"

Regards,
Akshada

Hello,

Your query is about ESI being paid centrally, as ESI is not governed by the State Insurance Act but by a central act.

Here is an example for your satisfaction:

I work at Checkmate Industrial Guards Pvt. Ltd. My company, located in Noida, is covered by the Kanpur Regional ESI office. Our ESI code in the draft letter is 11-2345-101, and both employer and employee contributions are paid to the State Bank of India. All contributions are submitted through challans, and cash is deposited in the SBI bank.

I hope you are satisfied with the above declaration.

Your question remains unanswered.

Example: I work for a Security Agency that has received a contract for labor supply work at M/S Coca Cola in Naziabad. Although our head office is in Noida, we operate in Naziabad (Uttarakhand). Our workers require medical facilities, but as we do not provide medical facilities under the ESI Act, we will apply for a sub-code in the ESI Branch office at Naziabad with all necessary documents. Once we receive the sub-code draft letter from the Naziabad ESI Branch office, we will submit the contributions at the SBI Bank in Naziabad. Employee declaration forms 1 and 3 will be submitted to the ESI branch office, following which ESI cards for medical facilities will be issued to all employees working on the Naziabad projects.

Note: The ESI State Insurance Act provides medical facilities to insured persons and their dependents.

Regards,

Lovenish Bhagat
Noida
lovenishbhagat@gmail.com