ESIC Percentage While Calculating Monthly Salary Of An Employee

Hi,
I have seen one of your comment related to salary breakup..which you have explained through 1 example and in that you have showned the formula for calculating monthly ESIC is 1.75% of Basic. But actually we are using this formula-- i.e., ESIC= 1.75%of total earnings. here i got confused. Please explain.

Dear Prajakta
For the purpose of calculating ESIC contribution 1.75% of total earning not basic, if an employee is getting Rs. 12,000/-.
e.g. monthly salary of an employee is :-
Basic : 7000.00
HRA : 2500.00
Conv. : 1000.00
Mis. All: 500.00
CCA : 500.00
Spe. A: 500.00
then we have to calculate the ESIC contirbution of the above on all the heads mention above, we will treat the salary for the purpose of ESI contribution Rs. 12000/- not basic. The contribution will be Rs. 12000*1.75%=210.00 (employee Share of contribution) and Rs. 12000*4.75%=570.00.

Thanks Mr. Mukesh...
I partially understood what exactly you have explained. As you know ESIC will be applicable to those employees whose total earning is upto Rs. 15,000/- Prior the limit was Rs. 10,000/-. Please tell me When shall we use the method of calculating ESIC on Basic???
Prajakta S. More

Dear Prajakta
The ESIC contribution should not be calculated on basic only, it will be on all the fixed allowances.