Confused About ESIC Deductions: Should It Be on Gross or Basic Salary?

There is a problem regarding the ESIC, i.e., whether the ESI is to be deducted on gross salary or basic salary. Suppose the salary of ₹18,000 is decided by the employer, then the basic is ₹18,000 * 40% = ₹7,200. In this case, I should deduct the ESI contribution of 4.75% from the employer and 1.75% from the employee's contribution. The question is whether these percentages should be deducted based on the basic salary of ₹7,200 or the total salary of ₹18,000.

Please provide clarification on this issue.

Regards,
Rajesh
HR

Clarification on ESIC Eligibility

Please note that if the salary is less than 15,000, employees are only eligible for ESIC. This benefit applies to the gross salary only.

Regards,
Eswar K.
[Phone Number Removed For Privacy Reasons]

First, ESI is calculated on the monthly gross salary. Second, any employee receiving a monthly gross salary of more than 15,000 does not fall under the purview of ESIC. For any further clarification, feel free to write or discuss.

Regards

We have to take into consideration the gross salary only for the calculation of ESI. The ESI eligibility amount has been increased from ₹10,000 to ₹15,000.

Following your example, if the salary is ₹18,000/-, the gross salary may be ₹13,000/-.

ESI Calculation:

- ₹13,000 * 1.75% for the employee
- ₹13,000 * 4.75% for the employer.

Regards,
JAGADEESH (HR & Admn)

ESI Calculation on Gross Salary
ESI has to be calculated on the gross salary but does not include washing allowance, annual bonus, incentive bonus, inam/ex-gratia payment, or newspaper allowance.

Thank you!