Understanding ESI Coverage for Piece Rate Earnings and Exemption Criteria

Dear Sir,

Regarding the coverage of ESI, I have the following doubt. Some of the contract workers are working in our industry on a piece rate, and all of them are covered under ESI. Most of these people earn more than Rs. 15,000 per month, including overtime, most of the time. They are requesting to be exempted from ESI coverage.

I informed my boss that all these workers should have a fixed wage exceeding Rs. 15,000 for us to remove them from coverage. However, he believes that since these individuals earn more most of the time, they can be exempted.

What should we do? Kindly clarify.

GIRI

Dear Giri,

Overtime will not be considered for the exclusion from ESIC. Only fixed wages have to be considered whether to include or exclude an employee from ESIC.

Regards,
Kumar

Please see if the total piece rate earnings, EXCLUDING overtime wages, are more than Rs 15,000. If so, continue coverage until September and thereafter make them out of coverage. By that time, sometimes, the ESI wage ceiling will be revised. Anyway, in the middle of the contribution period, you cannot stop contributing.

Madhu.T.K

Dear Madhu garu,

You are right in the middle of the contribution period we can exclude. But if he got more than Rs. 15,000/- salary (Piece rate) in October, November, December, and got Rs. 12,000/- in January and February, what is the position? Because he may have received less than Rs. 15,000/- salary when dispatches are reduced during January to March. Then, in such situations, what rule will be followed.

Kind Regards,

M S GIRI

Since the case is about piece rate, it is difficult to build up a nominal salary for coverage and out of coverage. Therefore, in such cases, take the notional salary as salary for deciding whether the employee is under coverage or not. By notional salary, we mean the salary which the employee would have earned if he had worked for all the days with 100% capacity utilization. Therefore, one or two months' earnings below 15000 will not make him covered since his average salary would be higher than Rs 15000.

Madhu.T.K