Esic calculation

This query is : Resolved

Pradeep kumar (Querist)
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19 October 2014 DEAR SIR,
PLEASE TELL ME IF DUE TO LEAVElate joining in the month AN EMPLOYEE EARNINGS GOES BELOW RS 15000 PER MONTH THEN IN THAT CASE EMPLOYER HAS TO DO DEDUCTION OF E.S.I OR NOT ??
Also pls inform me to apply esic to an employee the limit of 15000 is whether ctc or gross salary?

CA Bajrang Jhawar

CA Bajrang Jhawar (Expert)
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19 October 2014 2nd part answer:
As per Section2 (22) of ESI Act 1948-
“ wages ” means all remuneration paid or payable in cash to an employee, if the
terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not
illegal or layoff and] other additional remuneration, if any, [paid at intervals not exceeding two
months], but
does not include —
(a) any contribution paid by the employer to any pension fund or provident fund, or
under this Act ;
(b) any travelling allowance or the value of any travelling concession ;
(c) any sum paid to the person employed to defray special expenses entailed on him
by the nature of his employment ; or
(d) any gratuity payable on discharge ;

Though not defined by ESI act but in general parlance the terms are used as such :

Gross Salary, is What you get per month in your payslip before deducting your share for PF & TDS and

CTC= Gross Salary + Employer share of PF + Employer Share of Gratuity+ Other Benefits over & above Salary.

So, here you need to deduct ESI on "wages" and neither on your CTC or Gross salary

CA Bajrang Jhawar

CA Bajrang Jhawar (Expert)
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19 October 2014 1st part :
There are certain rules for ESIC deduction. The deduction happening in your case seems to be normal and that's how it happens.

The system checks for six months ESIC contribution period from (April to Sept) and (Oct to March)

So even if the "wages" is changed during this period system will continue to deduct.

for eg.

if "wages" is changed in June and it crosses 15000 K still system will deduct ESIC contribution till Sept month. Same if "wages" is changed in Nov month system will still deduct the ESIC till March. Interpretation in positive direction will answer your question and u can come to a conclusion

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Dhanashekhar K V

Dhanashekhar K V (Expert)
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21 October 2014 ESI will not be calculated on CTC. CTC means Gross Salary + Employer PF+ Employer Gratuity Group Insurance + other statutory benefits if any...

ESI applicability will apply only on fixed monthly gross salary. Examples below for your reference(assume figures are monthly).

Example 1
Basic : 6500
HRA: 3250
Conv:800
Spl Allow : 1000
Total Gross : 11550/-
ESI is applicable

Example 2
Basic : 10000
HRA:5000
Conv:800
Spl Allow : 2000
Total Gross is 17800/-
Let say you have joined mid month, hence you are getting salary for that monthly less than 15 thousand, In that case ESI will no be applicable. since you actual gross is more than 15 thousand.

Thumb rule: ESI is applicable upto 15000/- not as 14999/-

Hope the above is clarifies.

CA Bajrang Jhawar

CA Bajrang Jhawar (Expert)
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21 October 2014 It is not on gross salary please go through my above explanation, suppose if you are receiving travelling allowance Rs. 20000 and your salary other than travelling allowance is Rs. 14999 still the ESI is applicable as per explanations by Mr. Dhanasekhar which is incorrect. You have to strictly follow the law and not to take the general meaning.