Navigating ESI and Bonus Act Challenges: Can Salary Fluctuations Affect Coverage?

Query Regarding ESI and Bonus Act Coverage

I work in the Public Sector. In my plant, we have a few employees whose gross salary is lower than 15,000, i.e., they fall under the purview of ESI. The remaining employees are out of coverage as they have a higher salary.

The problem arises when, for example, the gross salary of an employee is 14,000. We pay for his ESI contribution as per the ESI Act. However, after a wage revision in May, his salary increases to 18,000. Automatically, he gets out of coverage, but according to the law, we will contribute until the end of the contributory period, i.e., October.

Due to absenteeism, the employee withdraws a gross amount of 14,000 in July and receives a net pay of around 13,500. Will this employee come back under the purview of ESI, as his salary falls below 15k due to absenteeism? Will this monthly change in salary due to absenteeism come into effect? My question is, once the gross crosses 15k, can the employee return under ESI if the salary for any respective month falls below 15k due to absence? Please provide me with the section in the ESI Act that addresses this.

Bonus Act Considerations

We pay a statutory bonus at 8.33% in the month of October. All the employees have a basic + DA around 25k. Naturally, they will not come under the bonus act, as basic + DA is higher than 10k. Suppose, for any month, an employee works for only 5 days due to sickness or domestic problems and withdraws a salary of 9k. Will I have to pay him a bonus for those months? In our plant, the bonus is paid annually, i.e., 8.33*3500*12.

If someone withdraws a lower salary for any month, will he come under the bonus act? Which section defines this? Can anyone help?

Regards

Understanding ESI and Bonus Act Coverage

I have a query. I work in the Public Sector. In my plant, we have a few employees whose gross salary is lower than 15,000, i.e., they fall under the purview of ESI. The remaining employees are not covered as they have higher salaries.

Now, the issue arises when the gross salary of an employee is 14,000, and we pay for their ESI contribution as per the ESI Act. However, after a wage revision in May, their salary increases to 18,000. Consequently, they automatically move out of coverage. Nevertheless, according to the law, we must contribute until the end of the contributory period, i.e., October.

In a scenario where an employee, due to absenteeism, withdraws a gross amount of 14,000 in July and ends up with a net pay of around 13,500, will this employee come back under the purview of ESI if their salary falls below 15k due to absenteeism? Would this fluctuation in salary due to absenteeism be considered? My question is, once the gross salary crosses 15k, can an employee re-enter ESI if their salary for any respective month falls below 15k due to absence? Can you provide the section in the ESI Act that addresses this?

Bonus Act Considerations

Another case involves the payment of statutory bonus at 8.33% in the month of October. All employees have a basic + DA of around 25k, so naturally, they do not fall under the Bonus Act as the basic + DA is higher than 10k. Suppose an employee works for only 5 days in a month due to sickness or domestic issues and withdraws a salary of 9k. Do I need to pay them a bonus for those months? In our plant, the bonus is paid annually, i.e., 8.33% of 3500*12.

If someone withdraws a lower salary for any month, will they then be included in the Bonus Act? Which section defines this? Can anyone assist?

Hi, I believe this situation has a simple solution. There is a difference between Gross Salary and Gross Earned Salary. Gross Salary is the assured salary by the organization for working the full month, while Gross Earned Salary is the employee's earnings based on the number of days worked for the month.

ESI and the Bonus Act are applicable based on Gross Salary but calculated on Gross Earned Salary. What I mean is that if an employee's Gross Salary for the month is 15,001, the employee is outside the ESI Act's purview, regardless of their Gross Earned Salary. Even if the employee's Gross Earned Salary is below 15,000, they are not required to contribute to ESI.

In your case, the employee's contribution needs to be made until September based on their total earnings for the year.

I hope this information proves helpful.