Salary Over Rs. 15,000: Are Employees Losing ESI Benefits and What Are Employer Responsibilities?

Please inform me if an employee who reaches a salary of Rs. 15,000 or above will be excluded from ESI benefits. What would be the employer's liability towards this employee?

After reaching the ceiling limit of ESI Coverage, the employee must be covered with an Employee Compensation Policy. The liability will be taken care of by the insurance company if the employer has the WC Policy; otherwise, the employer has to bear the cost.

There is no option to continue with ESI coverage once an employee exceeds the wage limit of Rs. 15,000 per month. However, if the wage limit is exceeded in the midst of the contribution period, the ESI coverage will last until the end of the contribution period.

Regards,
B. Saikumar

ESI Coverage and Salary Ceiling

Once an employee is under ESI coverage and gradually exceeds the limit of Rs. 15,000/-, and his contribution continues on this ceiling amount, adding that of the employer's contribution, the employee shall be covered. If the employer doesn't want to contribute beyond when the employee exceeds the ceiling amount and wants to provide alternate insurance benefits to the employee, then the employee will be out of ESI after the completion of the benefit period.

Regards,
Eswararao Ivaturi

There is no liability from the employer's side if the statutory ESI limit of Rs. 15,000 or more is reached. Some companies provide insurance through tie-ups with other insurance companies. Some don't.

Regards,
Srinivas

The ESIS laws are clear on this; however, the interpretation given by some for this query is wrong. Upon exceeding ₹15,000, the employee becomes exempt and hence is out of ESIS. As such, the employer has no bounden liability as long as the employee is accident-free.

The problem starts if the employee meets with any kind of accident in the course of discharging his duties. Here, the Workmen Compensation Act is applicable. It is advisable to cover such liability by paying a negligible sum as a premium to any insurance company for an Employee Accident Policy where such payouts are taken care of by the insurance company within the sum insured for each employee.

A woman employee not covered by ESI will be eligible for benefits under the Maternity Benefit Act. Insurance is not a legal liability of the employer.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

In light of some confusing interpretations regarding the coverage of employees for ESI benefits, I would like to refer to Sec. 2(9), which defines an 'employee' for the purpose of coverage. According to this definition, every person employed for wages, whether directly by the principal employer or indirectly through a contractor or let on hire to the principal employer to do the work of an establishment or any work connected with that of the establishment, is eligible to be insured for ESI benefits. However, subsection (9) of Sec. (2) excludes the following persons from the definition of 'employee', which means excluding them from the coverage of ESI.

- A member of the armed forces;
- Any person whose wages (excluding OT) exceed the wage limit fixed by the Central Government. The Central Government has fixed the wage limit under ESI Rule (50) at Rs. 15,000/- per month (which is likely to be revised to Rs. 25,000/- as it is learned).

Provided that those whose wages exceed the wages so fixed by the Central Government, which is now Rs. 15,000/- per month at any time after the beginning of the contribution period, shall continue to be an employee (for the purpose of coverage) till the end of the contribution period.

To sum up, the meaning of Sec. 2(9) of the ESI Act read with Rule 50 of ESI Rules is that an employee whose wages exceed Rs. 15,000 per month at the beginning of the contribution period is excluded from the coverage. However, if their wages exceed at any time after the beginning of the contribution period (in the middle of the contribution period), they will continue to be covered till the end of the contribution period only.

This is what the Act and rules say.

Regards,
B. Saikumar
HR & Labour Law Advisor

Ultimately, no employer would like to take the liability of contributing to an employee who exceeds the ceiling amount. It is advisable to cover such employees under the Group Insurance scheme.

Regards,
Eswararao Ivaturi.