Understanding ESI Calculation: Are We Doing It Right with Our Salary Structure?

Hi,

My question is how to calculate ESI in salary. My company divided the salary structure into basic, DA, HRA, CA, WA, SPA, and EA. Currently, we are only calculating basic and DA. Is this correct? Please provide suggestions.

Please refer to the definition of 'wages' as applicable in the ESI Act, 1948. You have used abbreviations in your question. But as I understand them, all of them will have to be included in the 'wages' for payment of contributions. Remember that ESI contribution is NOT ONLY ON BASIC AND D.A.

Definition of "Wages"

"Wages" means all remuneration paid or payable, in cash, to an employee if the terms of the contract of employment, express or implied, were fulfilled. It includes any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal, or lay-off, and other additional remuneration, if any, paid at intervals not exceeding two months. However, it does not include:
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) any traveling allowance or the value of any traveling concession;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(d) any gratuity payable on discharge.

Regards

ESI Contribution Calculation

Other than washing allowances, you can calculate 1.75% (rounded up to the next higher rupee) towards employees' share and 4.75% of the total wages paid to all the employees, rounded up to the next higher rupee, to be paid towards the employer's share. This totals 6.5% to be paid before the 21st of the following month.

If you have any queries, don't hesitate to call [Phone Number Removed For Privacy Reasons] or email [Email Removed For Privacy Reasons].

Starting from 01.05.2011, the wage ceiling for coverage of an employee under ESI is ₹15,000.00.

No, as per the last year's amendment, i.e., from May 2010, the limit for coverage has been raised from Rs. 10,000/- to Rs. 15,000/- per month. So now, employees with a gross salary less than or up to Rs. 15,000/- per month are covered under ESIC.