How to Include Loaders with Low Basic Salary in ESIC Scheme? Seeking Advice on Salary Splitting

Respected all, I'm a contract staffing vendor. I have received a new client who has a certain number of employees whose basic salary is less than 10,000, and incentives nearly 20,000. Since these employees are loaders, the company wants to include them in the ESIC scheme. Kindly suggest a way to create a salary splitting with this figure, including in ESIC.

Thank you

Regards

ESIC Calculation on Basic Salary

ESIC is calculated on the basic salary. Incentives are not a part of the salary structure, as they are variable. So, you can go ahead and create a salary structure based on their basic salary.

Hope it helps!

All variable and fixed components attract ESI. The ESI is calculated on the gross amount irrespective of whether it is basic, HRA, CA, etc.

Solution to Avoid ESI on Incentives

In order to avoid the issue you are facing, kindly start paying your incentives on a quarterly basis as this does not attract ESI. For example, incentives for January, February, and March are to be paid out with the salary of April, which will be paid on the fixed salary date of May.

Hope this will help you.

Regards

Understanding ESI Deductions and Coverage

ESI is subject to a deductible on the wages that an employee earns on a regular basis, i.e., Basic, HRA, Conveyance, Special Allowance, etc. Also, please note that payments made to an employee with a periodicity of less than two months shall also be considered as wages, i.e., Incentive, OT, Commission, thus they shall also attract ESI.

Now, what I understand from your query is related to the coverage, and it seems there is a slight confusion between wage and incentive. Please note that the variable incentive paid to the employees should not be considered for employee coverage in ESI, such as the ceiling limit of Rs. 15,000, because it is variable in nature.

I hope this will clear all your doubts. In case you still need further clarification, please write.

Regards,
Pushkar Bisht