How to Calculate ESIC for Employees with Company-Provided Accommodation?

Respected members, since ESIC has raised its limit from ₹15,000 to ₹21,000 starting from 1st Jan 2017, I have a question that I would like to request clarification on.

Salary Structure and ESIC Calculation

We have a few employees earning a consolidated salary of ₹15,200. Their salary breakup is as follows:
- Basic: ₹7,300
- HRA: ₹7,300
- Other allowance: ₹600

However, as we provide accommodation to them, we deduct the entire HRA of ₹7,300 from their salary, resulting in a final payment of ₹7,900 (Basic + Other allowance) after the HRA deduction.

Up to now, we have not been deducting PF from such employees as their gross salary exceeded ₹15,000.

Now, with the revised limit, could somebody please assist with the calculation for ESIC with this salary structure?

Apparently, ESI is also not applicable but would be correctly advised if you give a breakup of Allowances, i.e., Rs. 600. Moreover, it's an opportunity for borderline cases that can be corrected now.

Regds,
RDS Yadav

There is a mistake here. PF is payable unless their STARTING salary with your firm was above Rs. 15,000 (basic and DA only) and they did not have any PF account existing at that time. So you should be paying them PF.

ESIC is payable now for everyone whose salary is less than Rs. 21,000. So you will need to pay ESIC as well.

You will need to pay it on gross wages, which in your case is Rs. 15,800 per month.

Dear Atulagar,

Your employees are getting a basic salary of Rs. 7,300/-, thus they are eligible for PF Membership as the PF coverage ceiling was enhanced to Rs. 15,000 from Rs. 6,500 w.e.f. 1st September 2014. Now you are liable to pay both the employee's and employer's contribution to PF from their joining date or 01.09.2014, whichever is earlier (legally).

As regards the coverage of ESIC w.e.f. 1st January 2017, you can show only a basic salary of Rs. 7,300 plus O.A. Rs. 600 and discontinue showing HRA. This will save the employer's contribution of 4.75% and the employee will save 1.75% on his HRA amount. However, as a precautionary measure, you need to issue a separate letter to employees informing them that they will be provided with free accommodation and House Rent Allowance will be discontinued w.e.f. 1st January 2017. (Please ensure that the letter date should be prior to 31st Dec. 2016).

Thanks and Regards,
Suresh