ESI Calculation Dilemma: Should You Use Fixed or Earned Gross for the Ceiling?

ESI Calculation: Which Gross to Use for Ceiling?

Which gross will be used for the ceiling in ESI calculation: Fixed component gross or earned component gross?

For the eligibility, the fixed gross would be considered. However, if he/she continuously receives less than the prescribed amount for more than 6 months, it would attract ESI contributions.

Regards,
Ram

Components Under ESI Gross

Which components come under ESI Gross?

Professional Tax Calculation

Also, I have a doubt. Is Professional Tax calculated on the gross or net amount? Which components are considered for the calculation?

All components, including any allowance, are to be included under ESI wages (up to Rs. 15,000).

As per Sec 2(22) of the ESI Act, all emoluments other than those excluded under the Act—such as washing allowance and conveyance/traveling allowance—any additional remuneration being paid within a periodicity of 2 months is to be taken for the purpose of coverage and contribution.

OT should be included for contribution but not for deciding coverage.

Once the employee is covered in a contribution period, even if his wages exceed in between, the coverage and contribution should continue till the end of the contribution period. To elaborate, if an employee is paid Rs. 15,000 in April, he is to be covered under the ESI. Even if his wages exceed Rs. 15,000 due to any wage increase—periodical increment or any other reason—he should continue to be covered till the end of September, and contributions are to be paid on the total emoluments, not restricting to Rs. 15,000.

Regards,
S. Sankaralingam
Retd. Sr. Dy. Director, ESIC
Advocate & Labour Law Advisor

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