ESI Eligibility: Does Your Salary Include Overtime and Night Shifts?

ESI Eligibility Salary Limit Calculation

How is the ESI eligibility salary limit calculated when it is below Rs. 15,000? Is only the gross salary considered, or is the gross amount plus other incentives that the employee earns, such as night shifts and overtime, also included?

To determine the employee's coverage, his or her total salary is taken into account. If the salary or wage is Rs. 15,000 or less, then he or she will be brought under coverage. Incentives that are not variable will be considered for the calculation of ESI contribution.

Regards.

Thanks for the reply. I have one more question: is it mandatory for a Pvt Ltd company to provide ESI insurance to employees below the ₹15,000 wage limit? Earlier, my company used to provide the ESI facility, but starting from April 2013, we implemented a new salary structure with no ESI deduction. Kindly respond.

Firstly, you have to see the applicability of the ESI Act to the Pvt Ltd company. The ESI Scheme is extended to factories using power and employing 10 or more persons and to non-power using manufacturing units and establishments employing 20 or more persons and drawing wages/salary up to Rs. 15,000/- per month.

Though you have not elaborated on the reasons for debarring the employees of your company from the ESI facility from April 2013, I can only guess that probably ESI deduction has been stopped because all employees must have crossed the wage/salary limit of Rs. 15,000/- per month due to the change in the salary structure.

Regards,
BS Kalsi
Member since Aug 2011

ESI eligibility is determined at the beginning of every contributory period. If an individual qualifies at that point, they remain eligible for the entire contributory period, even if their salary exceeds the limit later on.

Calculation of ESI Eligibility

For calculation purposes:
- The total gross amount will be considered, along with
- Any additional earnings (such as incentives) that are paid at intervals not exceeding 2 months.

If incentives are paid on a monthly basis, they must be factored into the calculation. However, if they are paid once every 3 months, they do not need to be included.

Thank you.

Irrespective of the status of the company (partnership or private), ESI is applicable where you engage 10 or more workers. Given to understand that your company has revised the salary structure, if the salary is structured in such a way that employees are getting more than 15,000 rupees, then you are not liable to pay the ESI contributions. If the same salary revision was done after April, then you are supposed to deduct ESI up to September 2013.

Regards,
C. Manimaran
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