Understanding ESI Contributions: How Does a Mid-Year Salary Increase Affect Coverage?

Dear Friends,

Can anyone help me in explaining about the half-yearly contribution for the following case study? An employee is receiving a salary of Rs. 9000 from April to June. If he receives an increment in July, where his gross salary exceeds Rs. 10,000, what will be his contribution? Also, until which period is he covered under ESI?

Please reply urgently.

Thanks,
T. PRABHAKAR.

Once the employee's salary exceeds Rs. 10K, he is out of the purview of the ESI Act. During the period of his contribution, the employee will benefit in the "benefit period," i.e., for the April-September contribution period, the benefit period is "January-June."

Even after crossing the limit of Rs. 10K in the month of July, he will keep on contributing towards the ESI deduction for that contribution period, which is from April to September. He will contribute 1.75% of the full salary. He will be exempted from ESI from October onwards.

If the salary of a person is Rs. 9,000 from April to July and he is getting a raise to Rs. 10,500 in August, he is supposed to contribute ESI on the entire amount of his salary until September (that is, until the contribution period ends). From the next contribution period, no ESI deduction shall be made for him since he is an excluded employee.

Dear Mr. Prabhakar,

The contribution period for ESI is from April to September and October to March. As per the ESI Act in force, all employees whose gross salary is less than Rs. 10K are covered under ESI. Please note that if an employee's gross salary increases to more than Rs. 10K during the contribution period, then ESI contributions will have to be made until the end of the contribution period, i.e., till March or September (as the case may be). For example, if an employee's salary increases in June, then ESI contributions will have to be made until September. Effective from October, these contributions will cease.

I hope this clarifies your issue.

With best wishes,

Amarnath Sagala

Dear Friends,

I agree with the statement you provided, but I have a doubt regarding whether we have to follow any principles to close the ESI contribution of a particular employee when their salary is increased above Rs. 10,000/-.

I am waiting for a response.

Regards,
Ramnath

Dear Mr. Prabhakar,

In case the salary exceeds the ESIC wage limit during the contribution period, the ESIC contribution shall be deducted up to the ceiling limit, that is, Rs. 10,000/- and not on the excess amount exceeding Rs. 10,000/-. The contribution shall be payable till the end of the contribution period, whereafter the employee shall cease to be a covered employee.

S.C. Verma

Respected Sir,

My query is, we have more than 5 contractors in my establishment, and each of them has not more than 20 manpower. As a principal employer, do I need to obtain a registration certificate from the Labor Office?

URGENT...

Dear friends,

What is the amount of contribution if an employee's salary falls below 10K when they are non-ESI? Should we pay the contribution if this happens? I am talking about reductions in salaries during times of recession. If an employee's salary is Rs. 10,000 per month and it decreases to Rs. 7,500 per month, what will be the amount of contribution?

Please, seniors, reply fast.

Shahida.R

Dear Ms. Shahida,

Yes, obviously, if there is a deduction in salary, you can't enroll him/her under ESI. If the salary package is less for that particular period, then you have to enroll him under ESI, and it will continue until the contribution period.

Regards,
Ramnath

Dear Mr. SC Verma,

Mr. Rajeev is also correct, except that the ESI contribution shall be up to the ceiling limit.

V.K. Gupta

Dear Pavini,

If in your establishment the total number of contract employees is more than 20, then your establishment is under obligation to obtain registration from the Labour Department to employ contract labor. If the contractors have more than 20 employees in your establishment, they must register and obtain a license from the labor department, which will be issued for one year. If the contractor has fewer than 20 employees, they are not required to obtain any license.

V. K. Gupta

Dear Ram,

Your query has been correctly answered several times over. Prabhakar has given you the solution in detail. There is no principle to follow. Just exclude the name of the concerned employee and do not make any deductions/contributions for him/her from the next Contribution Period. In this case, effective from 1st Oct.

Cheers,
Vasant Nair

Hi, everyone. My question comes from T. Prabhaker's query. My question is, will ESI contributions from July be deducted from Rs. 9000/- or from the raised salary? Kindly solve my doubt.

Dear Friends,

I hope that the person who receives a salary increase in the month of October and surpasses 10K is exempt from ESI starting from October itself. For such an individual, what will be the beneficiary period?

No procedure is in place for informing about the ceiling limit crossed by an employee. Simply by not entering his name in the Employees register maintained under the ESI Act, no contribution is recovered from him for the next contribution period.

Dear Reya,

ESI contribution is to be deducted from his total salary, even if it exceeds Rs. 10,000, until the contribution period ends.

Contribution Period:
1st April to 30th Sept.
Benefit Period:
1st Jan of the following year to 30th June

Contribution Period:
1st Oct to 31st March
Benefit Period:
1st July to 31st Dec of the following year

Thank you.

Dear Ria Thomas,

Contribution Period: 1st April to 30th Sept. Benefit Period: 1st Jan of the following year to 30th June

Contribution Period: 1st Oct to 31st March Benefit Period: 1st July to 31st Dec of the year following

Dear Pavani,

If your establishment is covered under the ESI Act and your contractors' staff are not under ESIC, payment made to them is coverable under ESI at the time of inspection. To avoid this, you can get the employees of contractors covered along with your employees and deduct the ESI contributions (both employee and employer) from the contractors.

Sir,

Please clearly explain to me about the salary structure, including details on basic pay, allowances, PF, ESI, and their respective percentages. I am eagerly awaiting your reply, sir.

Dear Pavani,

Every establishment has to obtain registration from the labor office for employing 20 or more employees through contractor(s) under the Contract Labor (R&A) Act. Therefore, you have to obtain registration from the labor office, even though your contractors are not required to obtain a license under the act as their workforce is below 20.

Regards,

Ajay Shukla
Labour Law Consultant, Kanpur
09839066035

Dear all,

How is it possible? According to the ESIC Act, after 10,000 employees, contributions are exempted. Therefore, in my opinion, there is no need for contributions until September.

Regards,
AJAY KUMAR

Thanks, Mr. Ramchandran, for defining the benefit period and contribution period. I have a case where an employee had been transferred to a metro where he was out of ESI and came under ESI scope in the month of April under the previous ESI ID Card No. Later, he moved to another company where he continues to be under ESI but under a different establishment code. He met with an accident in due course. I would like to know whether he is eligible for both Medical and Sickness Benefit during the period (May - Sept). Please help.

Thank you, Mr. Vasant, but I am not fully satisfied because we issue an ESI card to the employee. I think we have to submit any forms for the cancellation of that card. Please clarify if anybody has particularly dealt with this.

Regards,
Ramnath

Dear Ria Thomas,

In your specified case, the employee cannot avail benefits from the old card as he is employed in another company. However, if he is not working anywhere, he can avail the benefit. Since the specified employee also has ESI facility in the new company, he can avail all the benefits using the new company's ESI number. In the case of an accident, the new company's HR department can obtain the ESI card immediately by submitting a declaration form and accident report directly to the ESI local office. Then, the employee can avail all such benefits. I have encountered a similar situation with one of my employees and handled it in the same way.

Thank you.