ESI Calculation Confusion: How Do We Handle Two-Month Salary Cycles?

ESI Calculation Challenge with New Salary Cycle

Hello Seniors, this is in regards to ESI calculations.

Previously, our salary cycle was from the 1st to the 31st. So, ESI for this working month was submitted in the next month itself. Now, the challenge we're facing is that since our salary cycle has shifted to the 21st to the 20th, there are two months in question. So, ESI calculations now are a major roadblock.

Example of ESI Calculation Issue

For example, the salary of March (1st to 31st) was paid to the employee on the 10th of April. ESI for March (1st to 31st) was submitted on the 10th of April - no problem at all.

Now, the salary of May (21st April to 20th May) is paid to the employee on the 1st of May. How do we calculate the ESI now, where two months (April & May) are in question? Note that the ESI of May's salary (21st April - 20th May) in this case will need to be submitted on the 10th of June.

So, if an employee joins us on the 21st of April, his ESI as per the above statement will need to be submitted on the 10th of June. That's two different months later. The ESI system says if the date of joining is the 21st of April, then ESI should be submitted in May and not in June.

Please help us with this.

I understood your problem. In this case, you have to adjust his DOJ to the 1st of May to enable the ESI. When it comes to the contributions, you will pay the salary to the employee for the last 10 days of the previous month and the full 31 days of May on the 31st of May or the 1st of June. Therefore, his salary would include payment for 41 days, which can be considered his Gross Salary for the first month's contribution. Moving forward, you can pay his contributions as usual along with those of all the other employees.

The employee will not be affected by the change in DOJ concerning the benefits. However, it is essential to have 72 working days within a contribution period to avail all the ESI benefits.

Best Regards,
Ravichandra

Please see Section 2(23) of the ESI Act, 1948, which defines the "wage period." Similarly, please also refer to Regulation 31 of the ESI (General) Regulations, 1952, which prescribes the time limit within which the payment of contributions is to be made.

If you have revised the wage period, and it is not a calendar month, as per the above regulation, the contribution shall be paid within 21 days of the last day of the calendar month in which the contribution falls due.

If you are experiencing online difficulties in making such contributions, you can contact the appropriate Branch Office of ESIC.

Sir, thank you for your views. I do have one question, though. Our pay cycle ends on the 20th of every month, so how would we calculate 41 days of salary? The salary payable would be from DOJ 21st April to the end of the cycle, which is the 20th of May.

Thank you once again in advance.

Regards,
Mark