ESI Deduction Confusion: Are We Breaking the Law with Rs. 16,000 Wages?

I would like to clarify about ESI exceeding limitations. If an employee is receiving wages of Rs. 16,000 and we are deducting ESI for Rs. 15,000, is the employer at any risk of violating the law?

Thanks & Regards,
Rajashree R

1. Please ensure that the difference of Rs. 1000/- (16000-15000) as per the example mentioned by you is not considered Overtime. Overtime contribution is required to be paid even if the total wages exceed Rs. 15000/-.

2. If the amount of Rs. 16000/- is exactly the "wages" without any element of Overtime, then the employer should not include such an employee under the ESI Act, 1948 right from the first month of the next contribution period (from which wages exceeded the coverable limit).

3. Even if the employer deducts the contribution and categorizes the employee as covered under the said Act, making them eligible for benefits, it would be an erroneous coverage of an employee. In the event of any wrongful benefit payment, including medical benefits, it would constitute a false statement by the employer and could lead to prosecution under section 84 of the Act. Kindly refer to the Act to understand the extent of such punishment.

I would also like to add that in cases of erroneous or incorrect coverage of any employee under the ESI Act of 1948, the benefits already disbursed to the employee or their dependents must be recovered by the ESIC. This includes the value of any medical benefits provided. Furthermore, the concerned employee could potentially face prosecution under the provisions outlined in the aforementioned Act, as I mentioned in my previous comments.

Dear All,

I would like to understand the current calculation of PF and ESIC in detail with an example.

Thank you.