How to Calculate Employer's ESI Contribution When Salary Exceeds the Limit?

A V Veerkar
I want some help in arriving at the correct figure for the employer's contribution for ESI. To give an example, an employee has a salary of 8000 per month in October (beginning of the contribution period), and thus the employer's contribution is 4.75% of 8000, which equals 380 rupees. Now, the salary increases to 12000 per month starting from January, and thus the employee goes outside the ambit of ESIC. However, the employee will have to contribute until the end of the contribution period, i.e., till March.

I want to know, from January to March, what will be the amount to be paid as the employer's ESI contribution. Is it 4.75% of 12000 = 570 or 4.75% of 10000 = 475 rupees (10000 being the maximum salary for which ESI is applicable)?

A.V. Veerkar
welcomeumesh
Hi,

At a salary of Rs. 12,000 a month, this employee is out of ESI coverage, and there is no need to contribute to the ESIC after the pay increase. Once the employee is not under coverage, you need not submit contributions from the employee or the employer's side. ESI is a little different from EPF. Even if you want to contribute, you can do so, but at the actual salary that the employee is drawing.

Regards,

Umesh
(umesh.chaudhary@ril.com)

I want some help in arriving at the correct figure for the employer's contribution to ESI.

To give an example:

An employee has a salary of 8000 pm in Oct (beginning of the contribution period), and thus, the employer's contribution is 4.75% of 8000 = 380 rupees. Now the salary increases to 12,000 per month from January, and thus, he goes outside the ambit of ESIC. However, he will have to contribute until the end of the contribution period, i.e., till March.

I want to know, from Jan to March, what will be the amount to be paid as the employer's ESI contribution. Is it 4.75% of 12,000 = 570 or 4.75% of 10,000 = 475 rupees (10,000 being the maximum salary for which ESI is applicable)?

A. V. Veerkar
bagema
Hi,

Until the end of the cycle, i.e., October to March, you need to deduct the ESI once it starts in October. The deduction would be from the complete salary, i.e., 12000/-.
Chandrasekar.S
What Bagema said is right. ESI should be paid until the end of the contribution period and for the full amount of 12000.

Chandrasekar
pradiptadatta
ESI is payable for any employee, regardless of their level, who has a salary/wages within Rs. 10,000 per month.

Regards,
A V Veerkar
Hi,

Thanks a lot Bagema and Chandrashekhar,

That means for a salary of 12,000 per month, the employer will have to deposit 575 per month. It looks a little illogical. When the upper limit for ESI coverage is 10,000, beyond which it ceases to be applicable, one would expect that there would be a cap of 475 rupees (4.75% of 10,000) for ESI contribution. Strange are the ways of the law. Anyway, thanks a lot for the clarification.

A. V. Veerkar
Soni Dadhwal
Thank you.

As a trainee, it doesn't fall under the definition of an employee. Do we have to provide medical insurance to the trainee, or is the Workers' Compensation Act applicable?

Regards
prashant_patil
As they are trainees in your factory premises, and if any accident happens to them, you are responsible for it. Therefore, medical insurance is necessary.

Regards
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