ESI Contributions on Salary Arrears: Do We Owe for Past Months After a Pay Raise?

1. An employee whose salary was $400 per day increased to $600 per day. It was declared in November 2017, and the increase was to be paid from May 2017 onwards. Do we have to remit ESI contributions on the increase of $200 per day from May onwards?

2. An employee's wages were fixed in November 2017. He was working from May 2017 to November without salary. Now, do we have to pay ESI on his salary for the period from May to November?

It is clarified by ESI in their booklet as follows:

Frequently Asked Questions on ESI Scheme

(This booklet is only for awareness purposes and can’t be referred to or quoted as legal.)

What is the effect of an increase in wages from a retrospective date?

In case the wages of an employee are increased from a retrospective date resulting in crossing the wage limit prescribed, its effect on the coverage of that employee is only after the expiry of the contribution period during the currency of which such increase is announced or declared. The contribution on enhanced wages is also payable from the month in which such increase is announced. There is no need to pay the contribution on the arrears for the period prior to the month of declaration, announcement, or agreement.