Navigating ESI and Bonus Act: How Do Salary Fluctuations Affect Coverage and Entitlements?

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.

ESI Contribution and Salary Fluctuation

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. They automatically move out of coverage, but according to the law, we must contribute until the end of the contributory period, i.e., October.

Now, due to absenteeism, the employee withdraws a gross amount of 14,000 in July, resulting in a net pay of around 13,500. Will this employee come back under the purview of ESI if their salary drops below 15k? Does the monthly fluctuation in salary due to absenteeism affect this situation? My question is, once the gross salary crosses 15k, can the employee return under ESI if their salary falls below 15k for a respective month due to absence? Please provide me with the section in the ESI Act where this is specified.

Statutory Bonus and Salary Reduction

Another case is... We pay a statutory bonus at 8.33% in the month of October. All employees have a basic salary + DA of around 25k. Therefore, they do not fall under the Bonus Act, as the basic salary + DA is higher than 10k. Now, suppose an employee works for only 5 days in a month due to sickness or domestic issues and withdraws a salary of 9k. Would I still need to pay them a bonus for those months? Bonuses in our plant are paid annually, i.e., 8.33% of 3,500 multiplied by 12.

So, if someone receives a lower salary for any month, would they then come under the Bonus Act? Which section defines this? Can anyone assist with this information?

Considerations for ESI Coverage and Bonus Eligibility

In both cases, you have to consider the nominal wages, which is the salary an employee would have earned if they had worked for 30/31 days. Therefore, if an employee outside ESI coverage earns a lower salary due to unpaid leave, they will not fall under ESI for that specific month. Similarly, if a covered employee earns more than Rs 15,000 in any month through additional work and overtime payments, they will still remain under ESI coverage. (The ESI qualifying salary is set to increase to Rs 25,000, as announced by the Government.)

Similarly, you must calculate the eligibility for a bonus based on the actual salary rather than the salary earned. Therefore, if the regular wages exceed Rs 10,000 during the year, the bonus will be paid until the month in which the salary remained at Rs 10,000 or less. Any decrease in the actual salary earned will not be considered.

Regards,
Madhu.T.K

These employees are monthly rated, and the salary is fixed for a month. The ESI and Bonus Acts refer to monthly salary/wages; therefore, daily rate counts are meaningless. Both Acts apply to monthly salary, not daily.

Thanks,

Mritunjay Nath Sahu GM (HR)