ESI Deduction Dilemma: Should We Continue Deductions After a Salary Increase?

Hi,

As per ESI rules, we need to register the employees who are getting a gross salary up to Rs. 10,000/-, and we need to deduct 1.75% from their gross salary as ESI. My question is, if an employee receives an increment in his salary and now earns more than Rs. 10,000/-, should we deduct the ESI again from his salary? Please help us in this regard.

Thank you.

From the month of April to September, if any changes happen, the effects will be felt from October to March. If an employee is earning $9,000 from April to June and then receives a salary increase to $10,500 in July, they will no longer have to pay ESI starting from October.

Thanks,
Shashi

Yes, if any employee is getting a salary less than 10000/- and is entitled to ESI, during the contribution period from April to September or October to March, if his salary increases, the contribution will be paid on the higher salary up to the completion of the contribution period.

(Sahil)

In continuation of the earlier replies:

ESI Contribution Period: Apr - Sep | Oct - Mar (Financial Year)

Benefit Period: Jan - Jun | Jul - Dec (Calendar Year)

In case an employee's salary has been revised in the month of May (from 9500 to 10500), then he is supposed to contribute until Sep based on his actual gross (i.e., 10500) and vice versa.

Then he can avail the benefits of ESI until the following June since he has contributed until Oct.

I would suggest you to go through the ESI act for better clarification.

Hari R

ESI has two contribution periods:

1. From April to September
2. From October to March

If an employee is drawing less than Rs.10,000 at the beginning of a contribution period (1) and receives a raise to Rs.11,000 through an increment in the middle, say May, ESI deductions for him should be made on the total salary he receives until the contribution period ends, up to September. From October, you need not deduct ESI for him.

Dear sirs,

In continuation of the same subject, I would like to pose my question to my seniors. I am working in a construction company. As you all know, here workers are not considered permanent. Some of them work for six months or one year. Workers mainly do not want to provide their contact information because they are aware that they will not receive any refund, unlike in P.F., unless they encounter any issues such as accidents or medical problems. Can anybody suggest any other options? We have group insurance for our workers. Please reply.

Maximum limit for ESIC deduction is up to Rs. 10,000 per month (gross salary). Above Rs. 10,000, the person automatically comes out of ESIC coverage. Thus, ESIC won't be deducted for individuals earning more than Rs. 10,000 per month (gross salary).

The slab period for ESIC deduction is from April to September and October to March. If a person earns a salary of more than Rs. 10,000 from May, the deduction period falls under the April to September slab, and ESIC benefits are effective until September. From October onwards, the person is no longer covered by ESIC and is not entitled to the benefits.

Please let me know if you need further assistance.

As per the proviso to Section 2(9), he is continuously covered under the Act until the end of the contribution period, irrespective of an increase in salary in the middle of the contribution period. Under the ESI Act, there are two contribution periods: one from April to Sep and another from Oct to Mar.

For example, if a person crosses the limit of Rs. 10,000/- after April, let's say from May, he is continuously covered until September and is liable to pay contributions based on the enhanced salary only. He will be exempted from payment of contributions from October onwards but still entitled to receive benefits until June of the following year, EXCEPT for accident benefits. All other benefits remain eligible.

For accident benefits, he must be an employee as of the date of the accident, as per Section 2(8) of the Act.

Sanagapalli

ESI has two contribution periods:

1. From April to September
2. From October to March

If an employee is drawing less than Rs.10,000 at the beginning of a contribution period (1) and receives a raise to Rs.11,000 through an increment in the middle, say May, ESI deduction for them should be calculated only on the amount up to Rs.10,000 - that is Rs.175 - up to September or the end of the period.

Pardeep Kumar Verma
Assistant Manager - HR

Dear Praveen,

Since yours is an establishment where the risk factor is significant, you should persuade them to get covered under ESI, which is beneficial for both the management and workers in many ways. Otherwise, if you avoid the compensation aspect under the Workmen's Compensation Act, you should discuss with the management the option of covering them under ESI by having both the management and workers contribute to the scheme.

Thank you.

Dear pradeep69,

The employee is required to contribute the entire salary of Rs. 11,000 until the end of the contribution period, which is either in September or March, depending on the circumstances.

Thank you.