Understanding ESI Deductions: Does a Temporary Salary Drop Affect the 6-Month Cycle?

One of my seniors has advised that if the gross salary is reduced from 18,000 to 13,000 due to some reason, such as fewer days working, then the associate's ESI deduction will be done for that month until the 6-month cycle cuts off, even if the gross salary again changes to 18,000 from the next month onwards. Per my logic, it should not be there. Please advise.

Dear Member,

For coverage under ESI Act, we are to see the rate of monthly wages and not the earned wages for any calendar month.

With Regards,
R.N. Khola

"Plz advise guys ........ It's urgent......."

It is correct that if ESI is deducted once, it will be deducted for six months or until the submission of the return, but it is deducted based on the rate and not on the earned salary. It would be better if you decreased the salary of the concerned person, and the rest could be given to him in other modes, such as conveyance reimbursement, etc.

Hello Dharmender,

The maximum limit of PF deduction is Rs. 780, and it is based on the basic salary of Rs. 6500. I hope his basic salary would be more than Rs. 6500 in both structures so you may deduct Rs. 780 per month.

Alternatively, PF is deducted on a monthly basis, so you may deduct 12% of his basic pay every month.

Thank you.

Dear Dharmender, you are saying that whenever a person works abroad, their salary will be paid at a higher rate. In this situation, I think you must show his salary rate as a minimum of 15,001 for India as well, so that in both cases, ESI will not be applicable to him.

Provident Fund Contribution

For Provident Fund, if your industry has fixed or set the contribution limit for PF at 6,500 gross, then there is no problem, and as Saurabh suggests, do as it is. However, if there is no limit for PF deduction, then you have to make deductions on (basic + DA) monthly at 12%, and that will also be valid.

Regards,
Jitendra Singh