Confused About ESI Wages Calculation? Need Advice on Handling Washing Allowance Deductions

ESI Wages Calculation Query

I have a query regarding ESI wages calculation. In our organization, we have the salary components as Basic, HRA, Transportation Allowance, Washing Allowance, and CCA. Currently, we are deducting ESI on the gross amount, excluding Washing Allowance. The issue arises with some employees whose salary exceeds Rs. 15,000, and we are not deducting ESI. However, upon closer examination, it appears that if we exclude the Washing Allowance, their gross salary would fall below Rs. 15,000.

Upon discussing this with a consultant, I was advised to ignore the Washing Allowance in such cases. The principle is that if the gross salary exceeds Rs. 15,000, Washing Allowance should not be considered. Conversely, if the gross salary is below Rs. 15,000, we should exclude the Washing Allowance and then calculate the ESI amount.

Your guidance on this matter would be greatly appreciated. Thank you in advance.

Regards,
SV

Clarification on Washing Allowance Calculation

1. Sir, please clarify how the Washing Allowance is calculated and paid. Is the Washing Allowance paid to all employees regardless of whether they are provided uniforms/liveries by the establishment?

2. What is the monthly amount of the Washing Allowance per employee?

3. Is the Washing Allowance paid in accordance with the employer's policy and the terms and conditions of employment?

1. Sir, when you treat the washing allowance as not wages for the payment of contributions, then under such circumstances, your action to treat said allowance as wages only for excluding employees from coverage seems to be incorrect.

2. Therefore, in my opinion, the employees who are receiving wages up to and including Rs. 15,000/- after excluding the amounts of washing allowance are all coverable under the ESI Act, 1948, and contributions are payable. In my opinion, to be on the safer side, you may consult the area Branch Manager, Social Security Officer, or the concerned officer in the Regional/sub/divisional Office of ESIC on this matter as well.