ESI Deduction Dilemma: Do Salary Arrears Affect Contributions After a Raise?

Hello everyone,

ESI deduction is required if a person's salary has crossed 21000/- during the contribution period. For example, from April to October, his gross salary was 18000/-, and ESI was deducted based on this amount. However, with the recent increment, his salary has increased to 25000/gross.

1. Does he have to pay ESI on the arrears from April to October, considering it was already paid on the 18000/- gross salary?

2. If so, would this adjustment continue until the next contribution period up to March?

Thank you.

ESI Contribution Period and Wage Limit

For ESI contribution purposes, the financial year is divided into two halves: from 1st April to 30th September and the second half from 1st October to 31st March of the next year. If the wages of an employee (excluding remuneration for overtime work) exceed the wage limit prescribed by the Central Government (Rs. 21,000 or below) after the start of the contribution period, he continues to be an employee until the end of that contribution period. The contribution is to be deducted and paid on the total wages earned by him.

Contribution on Enhanced Wages

The contribution on enhanced wages is also payable from the month in which such an increase is announced. There is no need to pay contribution on arrears paid if the revision is given with retrospective effect.

Regards, Shailesh Parikh

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