ESI Contribution Confusion: Should We Round Up Employee Payments? Seeking Your Advice

Hi Friends,

Supposing the gross earnings of an employee are Rs. 6741/-. The employee's contribution towards ESI is Rs. 113.24 (1.75% on gross), and the employer's contribution towards ESI (4.75% on gross) is Rs. 307.37.

Now, my question is, what would be the amount of the employee's contribution towards ESI in the above-cited example? Will it be Rs. 113/- or Rs. 114/-? The reason for asking this question is that we are remitting the contribution to the ESI authorities by rounding off to the next higher rupee even if the contribution is less than 50 paise. Is there anything wrong if the company ends up paying the contribution high?

Request you all to help me by sharing your comments on this.

Regards,
Pradeep

Hi Pradeep,

As per ESIC law, you are supposed to submit the next higher value as a contribution even if it is less than 50 paise. You are doing nothing wrong if you are submitting more. If you are submitting anything less, then it becomes wrong. Hope this will clear your doubts.

Surya

Surya,

You are absolutely right. Earlier, we also used to submit the amount as per the round off of 50 paise. However, there were some amendments, and we started paying off the next rupee both for ESIC and PF.

Thanks,
Rahul Sethi

You are not doing anything wrong by rounding off to lower Rs.50, but it's better to ignore amounts below Rs.50, as the rule states.

Shahida

Hi friend,

Please tell me if this calculation is correct:
6741 / - * 1.75% = ? 113.24
6741 / - * 4.75% = ? 307.37

If this calculation is correct, kindly explain the process.

Hi!

According to the amended provision of Rule 51 of ESI (Central) 1950, both the employees' contribution and employer's contribution should be rounded off to the next higher rupee. This amendment has come into effect from 1-10-2004. Prior to this, the rule position was to round off the employee's contribution to the next higher multiple of five paise, and the total contribution payable under one challan should be rounded to the whole rupee if the fraction is 50 paise or more.

After the amendment of the Rule from 1-10-2004, the procedure followed by you is in order.

Dear Pradeep,

ESI contribution for the salary Rs. 6741/- (I hope washing allowance is not included in gross pay) will be as follows:
1. 6741 * 1.75% = 117.96, rounded up to the next Rs. 118/-
2. 6741 * 4.75% = 320.19, rounded up to the next Rs. 321/-
Totaling Rs. 439/-.

You are on the right track, but your calculations seem to be incorrect as mentioned in your query.

Regards,
KIRAN KALE

From 1st October 2004, Rule 51 of the ESI (Central) Rules, 1950 (Rate of contribution) has been amended. According to the amendment, both the Employee's contribution and the employer's contribution for each month are to be rounded up to the next higher rupee.

Regarding the calculation for Rs. 6741, the Employees' contribution at 1.75% amounts to 117.96, and the Employer's contribution at 4.75% amounts to Rs. 320.19. Rounding these figures up to the next higher rupee, they should be 118 and 321 respectively. Therefore, the payment made in this case is considered as underpayment.

K.V. Ramana Murty, Hyderabad