Can We Exclude Salary Increments from ESI Contributions? Urgent Help Needed!

ESI Exemption Query

I am Bharath J. I have a doubt regarding ESI exemption. Can anyone help me? It's urgent for me. The query is below:

In our concern, we are going to give an increment to our employees. As per the regular concept, the increment is applicable to PF and ESI. However, my higher officials feel that increasing PF is fine, but increasing the ESI is unnecessary because we are already paying ESI for some amount. They question why we should increase it since fewer people are actually using ESI, and others have it just for namesake.

For example:
- Mr. X: Current salary is ₹150 per day / ₹3,900 monthly (26 days)
- Mr. X: Current basic is ₹2,600 and allowance is ₹1,300
- Mr. X: PF amount is ₹312/- and ESI amount is ₹69/-

We plan to increase ₹100/- per day. The question is whether we can exclude this ₹100/- from ESI, if there is any exemption for allowance. Kindly guide me, please.

Regards,
Bharath J
[Phone Number Removed For Privacy Reasons]

There is no other option. You should increase even the ESI contribution. I don’t know on which grounds you are trying to exempt.

Hi, you can definitely opt for an exemption for ESIC payment by categorizing the enhanced amount of Rs. 100 as "Washing Allowance." However, before proceeding, ensure that the previous wage rate of Rs. 150 per day meets or exceeds the Minimum Wages notification applicable to the type of establishment your organization falls under, as per the state concerned.

If it does not, adjust a part of the Rs. 100 to comply with the said provision. Then, for the remaining amount, categorize it as "Washing Allowance," which shall be exempt from ESIC Contribution (both employee and employer sides).

Regards.

Thank you for your reply. I have heard that in ESI, the washing allowance is exempted from ESI contribution. Are there any other allowances exempted in ESI? My higher officials have mentioned that laborers are more interested in PF contribution rather than ESI deduction. Therefore, we are considering keeping their salary as is and making a minimal contribution to ESI as they expect.

Inquiry About ESI Allowances

Are there any other allowances in ESI similar to the washing allowance? Please advise me on this.

Thank you.

Thanks for your reply, Mr. Arnab Dasgupta, sir. For our concern, the minimum wage is 140 (Basic + DA) as fixed by our state government. However, we are already paying a higher amount of 150 per day.

Washing Allowance Considerations

If we consider a washing allowance, is it possible to provide it monthly or annually if we do not provide uniforms for laborers? How can we show the washing allowance in the muster roll? Do we need to create a separate register for this purpose? Also, is there any official documentation required from ESI concerning this washing allowance?

Wages have nothing to do with the Muster Roll. During audits and inspections, officials will cross-check the Challan and the register for the breakdowns. As long as the documentation is in order, "All is well."