ESI Dilemma: Should We Deduct ESIC When Monthly Wages Drop Below Rs. 21,000?

ESI Coverage Based on Monthly Wages

A person is earning wages (Basic + DA + Monthly Allowances (Fixed & Variable)) well above the limit of Rs. 21,000; therefore, he was not covered under ESI. However, if in any month his calculated wages fall below Rs. 21,000 due to unpaid leaves and reduction of performance-based incentives, then are we liable to deduct ESIC for that month? And does that bring him under ESI henceforth?

ESIC Applicability on Gross Wages

ESIC applicability is based on average gross wages. If wages are reduced due to absence or salary deduction, ESIC does not apply to the excluded employee. This is because if the full month's salary were calculated, it would exceed Rs. 21,000, so they are not to be included.

Performance Incentive and Wages

Performance incentive is not part of wages; please stay updated.