Confused About ESI Deduction for Paid Leave Days? Let's Figure It Out Together

Dear All HR veterans,

I have a question: If a person whose gross income is 14,500 in a particular month worked for 22 days and took 4 days of paid leave, how do we calculate the ESI deduction from his side? Is it 1.75% of 14,500 (total gross) or 1.75% of 10,633? I am very confused and would appreciate your help.

Regards,
Meetu Singh

Salary Calculation Based on Days Worked

Salary is calculated based on the actual number of days worked in a month. For example, if an employee worked 26 days in August 2011, their salary would be calculated as follows: 14500/31 * 26 = Rs. 12,161. ESIC will be deducted at a rate of 1.75% of Rs. 12,161.

Salary is calculated based on the actual number of days in a month. For example, if you are calculating for September, the calculation would be as follows:
14500 * 26 / 30 = Rs. 12567 (Present gross)
= 12567 * 1.75% = Rs. 220

Regards,
Vinay Kumar

ESIC Calculation on Earned Salary

ESIC is always payable on the actual earned salary. Here's how you can calculate it:

- **Gross per month:** ₹14,500/-
- **Number of working days (including holidays, paid leaves, etc.):** 26 days
- **Month days:** 30 or 31 (base will be considered accordingly)
- **Gross Salary for the month:** ₹14,500/31*26 = ₹12,161/- (for a month comprising 31 days)
- **ESIC Contribution by the employee:** ₹213/-
- **Net Payable:** ₹12,161 - ₹213 - (any other deductions) = ₹11,947/-

Further, if any other help or clarification is required, feel free to call or email at [Phone Number Removed For Privacy Reasons] / [Email Removed For Privacy Reasons].

Regards,
Pramod S. Bhadauriya

Hi Meetu Singh, ESI calculation is based on the gross salary of the employee. ABC person worked for 22 days and took 4 paid leaves in the month. The total number of days to be calculated for ABC Person is 22 + 4 = 26 days. The ESI percentage for the employee is 1.75% and for the employer is 4.75%.

The calculation for gross salary is Rs. 14500 divided by the number of days in the month multiplied by the number of working days, which equals Rs. 12567.00. The actual gross salary multiplied by the employee's ESI percentage of 1.75% is Rs. 220.00, and by the employer's ESI percentage of 4.75% is Rs. 597.00.

I hope this clarifies the calculation process.

Thank you.

Dear Meetu,

The calculation of salary depends on the company policy. Some companies use actual working days for calculating salary, while others use month days for wage/salary calculation. Therefore, you need to first determine your company's policy.

If you calculate salary based on the month days, then it would be gross salary per month day multiplied by total working days. If you calculate salary based on actual days worked, then it would be gross salary divided by the actual monthly days (e.g., 25, 26, or 27) multiplied by the total working days.

Some companies use 26 for calculating salary. For example, gross salary divided by 26 multiplied by working days.

From the above, you can determine the salary for working days, i.e., earning salary. For ESIC, the deduction would be earning salary multiplied by 1.75/100.

If you have any queries, please feel free to call.

Note: ESIC contributions are now done online.

Regards,

Hi All, I have questions to ask all:

1. If the employee's leave is paid leave, why would you deduct the salary from his earnings?
2. If the employee is on leave during a specific period, have you marked him as present or absent in the ESIC attendance register? If marked present, you need to calculate based on the total gross. If marked as on leave for those particular days, you must deduct that leave period.
3. The calculation you present to the ESIC department while computing ESIC wages should only consider 26 days, not the full month (i.e., not on the 30th or 31st days).

Regards, Siva Kumar Tata

Dear Siva,

In this case, the 4 days which are being deducted are not the 'leave with pay days'. As per the Employee State Insurance Act, for the purpose of the calculation of ESI, only the total number of working days in a month is taken into consideration. Sundays or any other kind of non-working days are deducted. Even if the employee has not taken any leave in the prescribed month, the calculation of ESI is done on 26 days and not on the basis of 30/31 days.

The salary paid to the employee would be the gross salary minus ESI and any other deductions. Paid leave will not be deducted. For any further clarification, you may discuss more.

Regards,
Parul Gupta

Dear all,

Going through all these write-ups, I found a lot of confusion. ESI has to be paid on the actual salary paid during the month. So, in the case of leave with wages, the employee gets the full salary, and hence the ESI deduction and contribution will be on the full salary, i.e., in this case, on Rs. 14,500/-.

In case it is leave without pay, then the actual payment to the employee is on the actual amount paid (14500/30*26)*1.75%.

In regular practice, the payment of salary is considered on the basis of 30/31 days and not on the basis of working days. The number of working days, i.e., 26 days, is applicable only for gratuity calculation where the basic + DA is divided by 26 to arrive at the gratuity.

Regards,
VGKVKM

The ESIC calculation that will be done in your case will have no change and will be done accordingly. As the employee has taken a paid leave, his ESIC calculation will be as follows: from the employee's side = Gross Salary less than 15,000 * 1.75% and from the employer's side = Gross Salary less than 15,000 * 4.75%. If the employee is on LWOP, then the calculation will be done based on the present days in that particular month accordingly.

Thanks and Regards,

Ravibhushan Pandav
HR & Admin Executive
[Phone Number Removed For Privacy Reasons]

The ESIC is not deducted from the Gross Salary. You have to review the breakup of salary components. Make an addition of all those components that constitute "wages" under the act. It is these wages (amount) on which ESIC contribution is to be deducted or paid from both sides, i.e., Employee [1.75%] + Employer [4.75%].

If the employee is monthly paid (monthly rate, paid for the actual month days), then wages are for the month days (30, 31, 28, 29 as the case may be) irrespective of holidays, authorized leave, etc., except LWP should be taken. The Act prescribes a different calculation for days for different kinds of workers, i.e., piece-rated, badli, time-rated, etc.

In your case, here Rs. 14500 (which is < 15000) is taken as the full monthly salary (time-rated), i.e., 22 (worked days) + 4 (paid leaves) + weekly off (if any) = 22 + 4 + 4 (suppose) = 30 days (total month days).

Employees: 14500 * 1.75% = 254
Employer: 14500 * 4.75% = 689
Total Contribution = 943

May this help you.

Regards,
Naresh

I am afraid you are confused, and you are confusing others too. The ESI Act nowhere mentions how to calculate monthly salary and which number of days to be considered while calculating salary. Please note that there are no two different kinds of salaries—one that is paid and one calculated for the purpose of ESI contribution. ESI Contribution is payable on the actual gross salary paid to the employee.

I don't understand why you people are creating confusion by using the phrase "actual working days." ESI is to be deducted from gross salary regardless of the number of working days if the gross salary is less than 15,000/-. This is an example of how a simple issue can be turned into a confusing one. Please refrain from making such comments on trivial matters, especially when directed at the HR department of the company.

Deduct the ESI at 1.75% as an employee contribution from the total gross salary earned (22 days worked, 4 days of leave with wages). Regarding the balance days, is it considered as LOP or paid weekly off? If it is a weekly off, you have to deduct for the whole month.

Regards,
Alphonse

Hello,

Now, ESIC is calculated online on their website. We just need to create an Excel sheet where we specify the total number of working days of employees in a month and the total salary given for the same month. Then, upload the file to their website. All calculations will be done automatically in their system.

Regards,
Yash

Dear Sir,

There is confusion in the deduction of ESI when employees work for 24 days, have 5 days of rest, and are absent for 2 days out of 31 days. His salary details are as follows: Gross - 14000, Basic - 7569, HRA - 30% of gross = 4200, Conveyance = 1600 (fixed), Other = 631.

Could you please advise on the amount that is taxable under ESI?

Regards,
Vipan Kumar Jogi

Dear Meetu Singh, firstly, you should have known these things:

Average daily wages (Central Rule):

(A) "Average daily wages during a contribution period" in respect of an employee means the aggregate amount of wages payable to him during that period divided by the number of days for which such wages were payable.

(B) "Average daily wages during a wage period" means:

(a) In respect of an employee who is employed on a time-rate basis, the amount of wage which 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.

(b) In respect of an employee employed on any other basis, the amount of wages earned during the complete wage period in the contribution period divided by the number of days in full or part for which he has worked for wages in that wage period: Provided that where an employee receives wages without working on any day during such wage period, he shall be deemed to have worked for 26, 13, 6, or 1 days or day if the wage period is a month, a fortnight, a week, or a day respectively.

WAGES: How wages are computed for payment of contribution?

The following wage components are taken into account for computation of wages for payment of contribution:

a) Basic Pay/Wages/Salary;

b) D.A/HRA/CCA/Overtime/officiating allowance/Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance/Education allowance/Food & Tea allowance/conveyance allowance;

c) Wages/salary/pay for weekly off and public holidays;

d) Commission paid to sales staff;

e) Subsistence allowance paid to an employee during the period of suspension;

f) Attendance Bonus or incentive or ex-gratia in lieu of Attendance Bonus or production incentive;

g) Regular Honorarium or salary or remuneration paid to a Director;

h) Collection Bhatta paid to running staff;

i) Actual payments made towards leave salary, lay-off compensation, or wages for strike period;

j) Any other remuneration paid or payable in cash to an employee if the terms of the contract of employment, expressed or implied, were fulfilled.

As per your above statement that the employee is on paid leave, i.e., he is eligible for a full month's salary without LOP. In this case, the Employee's ESI Contribution will be 1.75% of Rs. 14,500 (gross salary). If the company paid salary with 4 days LOP, then the gross salary will be divided by 26 days, and in this case, the Employee's ESI contribution will be 1.75% of 22 days' gross salary.

Regards, Amit

An employee has worked for 22 days, but the payable days are 26. When preparing the ESI challan, what should be entered for the number of days worked?

Thank you.