Is an Employee Still Eligible for ESI if Their Salary Increases? Seeking Clarity from HR Pros

Dear seniors,

If one employee's salary is $14,800 in June 2016 and in July his gross salary is $17,000, is he still eligible for ESI contribution? Please explain, as it was asked in an interview.

Thank you.

Dear Vikas,

Only the fixed component shall be considered for ESI deduction. If the gross salary has been increased from 14800 to 17000, then yes, ESI contribution shall be made even on 17000 until 30th September 2016.

Thanks & Regards,

Devesh Chauhan

Practicing in Accounts, Finance, Taxation, Labour Laws

Dear Vikas,

Under the ESI scheme, if wages are increased beyond the ceiling limit after the commencement of any contribution period, the contributor is required to contribute until the closure of that contribution period. In your case, ESI contributions will be payable until 30th September 2016.

P.K. Sharma

Thank you, all seniors, but tell me one more thing. If the salary is increased from $14,800 to $17,000, on which amount will the employee and employer contribute until the end of the fiscal year, in this case, until September 2016 (i.e., on $14,800, $15,000, or the full $17,000).

It is required to deduct ESI contribution till September, i.e., the contribution period from April to September. From October, he/she will be out of ESIC. The contribution should be deducted on 17,000/-.

Dear Vikas
Greetings of the day!!!!!!!
Under Employees' State insurance Act, 1948, we have to submit Return of Contribution/ Half yearly return 11th April (i.e for the contribution Period October to March) and 11th November (i.e for the Contribution period April to September) every year. The person can come out from ESIC after this period.
But ensure, his salary, calculated for exemption from ESIC must have fixed components. Which will be paid month on month to him.

Employer, as well as employee, contribution for ESI is calculated till September (April-September) or March (October-March) as per the reckoning.