ESIC Limit Change: Should April's Salary Arrears Include Deductions?

Dear All,

As we are all aware, the new ESIC limit has been changed from Rs. 10,000 to Rs. 15,000 effective from 01/05/2010. My question here is, if an employee's gross was Rs. 12,500, he was not covered by ESIC before 01/05/2010. Now, since the ESIC limit has increased, he is covered by ESIC.

He received a salary increment in the month of May effective from April 2010. So, the arrears for the month of April will be paid along with May's salary. Will ESIC be deducted from the arrears of April's salary, considering he was not covered at that time?

Please reply ASAP.

Regards,
Mahendra Furia

Dear Mahendra,

ESIC contribution will not be deducted for the April 10 months arrears payments.

Bhupesh

Hi! In April, the ceiling limit was only Rs. 10,000, and the employee was earning above this limit in April, which was the beginning of the contribution period. The revision in the wage ceiling only came into effect from 1st May. Hence, he is recoverable only from May onwards. There is no need to pay any contribution for April.

The general rule is that for any increase in dearness allowance or increment from a retrospective date, the ESI contribution is to be paid only from the month in which such an increase is announced. This is applicable to the coverage of an employee as well. In the case of a revision of wages from a retrospective date as a result of an agreement with the employees' organization or otherwise, the contribution is due only from the month in which such agreement is reached or the wage revision is announced, as the case may be. There is no need to pay any contribution on the past arrears. Similarly, the employee cannot be exempted from ESI from a retrospective date due to crossing the wage ceiling but continues to be covered until the end of the contribution period in which such a revision is announced. If wages are increased from Jan '10 and announced in May '10, contribution is to be paid on the enhanced wages from May '10. If the employee crosses the ceiling limit as a result of the revision, the contribution is to be paid until the end of Sept. '10.

I hope this clarifies your query.

Dear,

This new limit has been applicable since May 1, 2010. That's why it has no relation to the previous salary of the concerned employee.

Please let me know if you need any further clarification.

Thank you.

No change in the % of ESI deduction, i.e., the Employee's share is at 1.75% (rounded up to the next higher rupee) and the Employer's share is at 4.75%, totaling 6.5%. This amount is to be deposited on or before the 21st of the following month. In case of any queries, don't hesitate to call me at [Phone Number Removed For Privacy Reasons] or email me at [Email Removed For Privacy Reasons].

Even if the salary is increased, you cannot immediately stop the ESI contribution for them. You have to complete their cycle of the contribution period corresponding to the next benefit period. Abruptly, you cannot stop the contribution from the date of the new revision.

Contribution and Benefit Periods

1st Contribution period: April - Sep, 1st Benefit period: July - Dec
2nd Contribution period: Oct - March, 2nd Benefit period: Jan - June

Your staff continues to be a member until the end of that contribution period, and the corresponding benefit period is covered. For the remaining months of the contribution period, he has to pay ESI on the new wages and stop from the next cycle. So accordingly, plan the salary revision time.

Regards,
Chandru

Hi All, I am a new entry to this Cite HR. We have non-ESI staff, i.e., their gross was more than 10,000 until now. However, due to an ESI revision, they will now be covered under ESI. I would like to know if we can cover them after three or four months since I am waiting for the approval for their revisions. Is this possible?

Thanks,
Sakthivel P
HR Executive.

It's not possible. The scheme is not optional or voluntary. You have to cover all such employees from 1-5-2010. If you delay their coverage, the principal employer is liable to pay even the employees' share of contribution from their own funds. You cannot deduct the contribution for the back period from the employees' future wages. Besides, you are also liable to pay interest and damages for delayed payment. Legal action under Section 85 cannot be ruled out. So act in time.

ESI Coverage and Salary Increment

If any employee crosses the limit of ESI, then he will not be covered under the ESI Act. For example, if the present salary of the employee is ₹12,500 and is due for an increment, once the increment is given and if it is above ₹15,000, then he will not be covered under ESI. The ESI Act states that only employees drawing ₹15,000 and below are entitled to ESI benefits.

Regards,
Sudhir Volta Fashions

Dear Mr. Sudhir, you are under the wrong impression. According to the proviso to Sec. 2(9) of the ESI Act, if the wages of an employee cross the wage ceiling limit in the middle of any contribution period, he continues to be an employee until the end of that contribution period. Therefore, contributions are to be paid on the total wages until the end of that contribution period. By virtue of the contributions paid in that contribution period, he is eligible for both Medical Benefits and cash benefits (except employment injury benefit) until the end of the corresponding benefit period. If I am wrong, kindly correct me.

K.V. Ramana Murty, Deputy Director (Retired), ESIC, Hyderabad.

Dear All,

My question is, if my employee was receiving ₹14,000 in the month of July, is he eligible for ESI? Now, the employee is receiving ₹16,500. So, my question is on which amount ESI will be deducted - ₹15,000 or ₹16,500?

Regards,
Rudra

You have to pay on ₹16,500.00 till the end of the contribution period during which such a hike happened. This means you have to increase wages till September.

All the best...

I have a doubt about this. My employee is supposed to receive a salary hike from 10k to 18k in the October salary, which will be paid in the first week of November. So, can I stop his ESI deduction while filing the October ESI challan in November?

[QUOTE=DEEPTHI V.KUMAR;1975428]I have a doubt on this. My employee is supposed to get a hike from 10k to 18k in October salary, which will be paid in the first week of November. So can I stop his ESI deduction while filing the October ESI challan in November? If they are going to get a hike to 18k, please stop their ESI contribution for the wage period of October onwards. So you can stop their ESI deduction while filing the October ESI challan in November.

With regards.