Understanding ESI Deductions: What Happens When Employee Salaries Fluctuate?

Hi,

I have some doubts to clear regarding the ESI limit and contribution. If an employee's salary is INR 15,000 and, due to the declaration of LTA or other deductions, their salary decreases to less than INR 10,000 in any month, is it necessary to deduct ESI? Once ESI is deducted, is it compulsory to deduct for 6 months, even if their salary increases above INR 10,000? If ESI is to be deducted, to what extent should it be deducted (whether for INR 10,000 or if they are drawing INR 15,000, for INR 15,000 do we have to deduct)? Please clarify.

Regards,
Gireesh Thampi.S

Dear Gireesh,

To my knowledge, if an employee's gross salary exceeds Rs. 10,000, he will not be under the purview of the ESI Act. As you have stated, if due to other deductions his salary is less than Rs. 10,000, from that month onwards he will fall under ESI. The amount for calculation purposes will be his gross salary, regardless of the exact amount, up to the completion of the half-yearly returns.

Regards,
S. Achuthananda

Hi Achuthananad,

If the gross salary is less than Rs. 10,000/- or equal to Rs. 10,000/- and after deductions of LTA and other allowances, it is not necessary to pay ESI because it applies to the gross salary and not the net salary. Please correct me if I'm wrong.

Thanks & Regards,
Sivaranjani Sriram

Dear Giresh,

To my knowledge, for the deduction of ESI, we need to consider all components, i.e., gross salary, except for the washing allowance.

Regards,

S. Achuthananda

Dear All,

The calculation is done as follows:

CTC - Employer's Contribution to PF = Gross Salary
4.75% of Gross Salary would be Employer's contribution to ESI
1.75% of Gross Salary would be Employee's contribution to ESI

Hope this clarifies.

Regards,
Anantha.

Hi Girish,

As per my knowledge, ESI is deducted on an amount equal to or less than 10,000. The gross salary should be structured in a way that it does not fall below 10,000. In the scenario where the total salary is 15,000, ESI, once deducted, is applicable for a period of six months, which is half-yearly.

Regards, Ankita

Hi all,

ESI is deducted from the gross salary after all deductions, whether it is LTA or anything else. So, if an employee's gross salary is below 10000, we have to deduct ESI from it.

Regards,
Prashant Patil

Dear Achuthananda,

What I know is that ESI is calculated on the Gross salary, EXCEPT conveyance and different allowances, and one allowance mentioned by you. Please go through the www.esic.nic.in (wages section written in yellow boxes). This site is beneficial for all of us. Please share your information on it.

Mridula

To my knowledge, for the deduction of ESI, we have to consider all components, i.e., gross salary except washing allowance.

Regards,
S. Achuthananda

Dear Gireesh,

As per the ESI Act, if the Gross Salary is less than or equal to Rs. 10,000, the act applies. In your case, the employee is getting Rs. 15,000 as Gross, so definitely the employee will not come under the purview of the ESI Act. If his salary goes below Rs. 10,000 in any one of the months (due to the deduction of LOP, LTA, and any other deductions), the ESI act will not apply.

Once the ESI Contribution has been made for the particular employee, it is compulsory to deduct 6 months, even if his salary limit exceeds Rs. 10,000. The deduction should be limited only up to Rs. 10,000 for the particular contribution period.

If the particular employee's contribution is not paid to the ESI account, we can refund the same to the employee.

Regards,
Saravanakumar B
EXE-HR

Hi Achutanand,

Good answer. I agree with your point. To add to it, according to the new amendment passed in Oct '2006, ESI deduction is calculated on the CTC, which is $10,000 or less. Previously, it was applicable on gross salary less than or equal to $7,500. The rate of ESI deduction is 4.75% of the Basic salary.

Regards,
Poonam

Hi all,

What should be the minimum number of employees for ESI coverage in a software company? One consultant mentioned that a minimum of 10 employees is required, but to my knowledge, it is 20 employees for ESI coverage.

Hi,

Please check the latest amendment in ESIC. The ceiling limit has gone up to Rs. 15,000/-. You may have to consider his monthly salary & LTA as an annual benefit; hence, you should not consider this.

According to my knowledge, the ESIC has to be contributed for up to 6 months even if you start deduction for only one month.

Regards,
Malini

I just wanted to know whether there have been any changes regarding the amount of salary for which ESIC is to be deducted. Has the maximum limit of Rs. 10,000 been enhanced?

Thanks,
Mamta

Friends,

I need your help with two queries related to ESI deduction.

1. Will the incentive amount impact the ESI contribution?
2. How do we know if the employees' contribution is actually going into the government fund? As I have not seen the ESI number given by the HR to the employees.

Thank you.

Incentive as Part of Wages

1. Sir, the amount of incentive, if paid every month and as per the agreement and wage structure of the establishment, is to be counted as "wages" as defined under the said Act.

Obtaining ESIC Identity Card

2. You may insist and request your employer or their HR to supply you with the ESIC Identity Card along with the family Identity Card. Based on the Insurance Number allotted to you, you can confirm from the Branch Office of ESIC whether the employer is depositing contributions and complying with regulations. I believe there is now also an online procedure through which any insured person can obtain confirmation regarding compliance. You can obtain this information from the appropriate Branch Office of ESIC to which you are attached.