Understanding ESI for Daily Wage Workers: Should It Be Deducted from Rs. 390/Day?

Hi,

We all know that the ESI ceiling limit is Rs. 10,000/- per month. I have a doubt in this regard: in case of persons paid wages on a daily basis and if his daily wage is fixed at Rs. 390/- per day, is ESI to be recovered for such a case?

Regards,
Anand

Hi,

On daily wages, the ESI is not applicable when an employee is drawing a salary less than Rs. 40 a day, above which they are covered by ESIC, and both the employer and employee must contribute towards it.

In your case, the gross salary of this employee is more than Rs. 10,000.

Best regards,
Umesh
(welcomeumesh@yahoo.com)

But then, the monthly wages will vary every month. For example, in case the total working days in a month are 24 days, then his wages will be Rs. 9,360 per month. Can anyone help me in this regard?

Regards,
Anand

Hi,

Any daily wager receiving less than or equal to Rs 50 a day is not required to pay the contribution; the employer covers this cost. Anything exceeding Rs 50 falls under employee contribution. Therefore, in your case, the wage is significantly higher, and the individual must make the contribution.

If you have any further doubts, please reach out.

Email: kunumohapatra@yahoo.co.in

Pradeep Mohapatra HR ABC INDIA LTD.

Dear Anand,

In the ESI scheme, the contribution period is split into two - April to September and October to March. This is the period for which the half-yearly returns need to be sent to the ESI Corporation.

Hence for an employee - if a deduction is ongoing and the salary limit crosses the Rs. 10,000 limit, you will have to continue the ESI contributions until the end of the contribution period. For example, if an employee's salary is Rs. 9,000 during April, May, June - and gets revised to Rs. 11,500 from July - then the ESI deductions on the revised salary need to be done until the end of the current contribution period - that is until September. Similarly for the other contribution period also.

Hope this information is useful.

Regards,

P. Arun Kumar

Dear Anand,

Though the employee is paid on a daily rate of wages, you need to convert the actual salary on a monthly basis. Rs. 390 X 26 days = Rs. 10,140 (more than 10,000), hence exempted from ESI contribution. If the number of days is less than 26, he will still remain as an exempted employee.

Regards,
Suresh Ramalingam

Hi Anand,

In the case of an employee drawing a monthly pay, we term his salary as Gross monthly salary, which means an employee works for 26 days, and his salary is, say, Rs. 15,000, and he is out of ESI.

In another case where the employee is paid on a daily basis, his gross monthly salary will be calculated on the above basis.

In your query, the salary of that workman is more than Rs. 10,000; thus, you need to contribute towards ESI.

Also, a workman drawing a salary less than Rs. 50 per day does not need to contribute towards ESI from his pocket or share; instead, ESI provides them benefits at no cost.

In my last organization, paying daily wages was routine, and employees never wanted to contribute towards ESI from their pocket. One day, finally, we called many ESI representatives to give live examples of accidents and benefits covered for these employees. The ESI representatives demonstrated it well, and later, my colleagues in the HR department and I organized one-on-one meetings to clear every doubt raised by them.

We need to increase awareness of the ESI benefits to our employees.

Warm regards,

Umesh

(umesh.chaudhary@ril.com)

In your query, the salary of that workman is more than Rs. 10,000. Thus, you need to contribute towards ESI. I couldn't understand that, Mr. Umesh. Please clarify. Even though the salary is more than Rs. 10,000, still, a contribution has to be made to the ESI? In the Act, the limit is Rs. 10,000.

Dear HR Colleagues,

ESI Ceiling Increase and Salary Components

Now that the ESI ceiling has been increased from 10K to 15K, can somebody tell me what the components are that constitute the "salary" as per ESI rules?

Also, as our company gives Sodexo coupons (do they come under food coupons as mentioned in the ESI rules) and Rs. 1200/- every month towards medical reimbursement, can somebody advise whether these can also be taken into "salary"?

Regards,
V Chithranath

All friends are hereby informed that the ESI department has changed the wage limit from Rs. 10,000 to Rs. 15,000 w.e.f. 1st May 2010. A notification has also been received from the Government of India.

Please make the necessary arrangements.

ESI wage limit has been increased from ₹10,000 to ₹15,000 w.e.f. 1st May 2010. Notification has already been received.

Notification regarding the change of wage limit under ESI has been received. The same is applicable w.e.f. 1st May 2010.

You have to arrange for the same.

Dear Mr. Anand,

The average daily wage for an employee employed on a time-rate basis is the amount of wages that would have been payable to him for the complete wage period had he worked on all the working days in that wage period, divided by 26 if he is monthly rated, 13 if he is fortnightly rated, 6 if he is weekly rated, and 1 if he is daily rated (Rule 1-B of ESI (Central) Rules, 1950). When the wage ceiling for coverage was 10,000 a month, the average daily wages were 10,000 divided by 26, i.e., 384.62 per day. Now the ceiling is 15,000 a month. Hence, the average daily wage for coverage purposes is 15,000 divided by 26, i.e., 576.92 per day.

The employee continues to be covered until the end of the contribution period in which his wages exceed the wage ceiling, and contributions are to be paid until the end of that contribution period.

K.V. Ramana Murty, Hyderabad