Dear friend, ESI contribution is to be calculated on the total gross wages. S. Krishnamoorthy
From United States, Roslindale
5From United States, Roslindale
Dear Pratap,
I hope the following explanation helps you
ESI will be calculated on WAGES that includes all remuneration paid or payable in cash to an employee, if the terms of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lockout, 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 traveling concession.
c) Any sum paid to a person employed to defray special expenses entailed on him by the nature of his employment.
d) Any gratuity payable on discharge
While calculating the coverage of ESI the OT paid to an employee should not be taken under consideration Sec2 (9)
But while calculating the contribution of ESI, the OT value should be taken under consideration
Sec2 (22)
E.g. Basic 2000
DA 2500
HRA 1500
TA 650
MA 750
Shift allowance 500
SPL Allowance 1200
Misc Allowance 500
OT 1000
Total = 10,600
Now in this case the employee whether should be covered under ESI or not will be found out by adding all the components other than OT, which comes to 9,600/- which is below 10,000/-, and as a result the employee is covered under the ESI Act.
But while calculating the contribution the amount of OT has to be taken as per the definition of “wages” of ESI Act and as a result the contribution of 4.75% will be calculated by taking the OT value under consideration i.e. 10,600/-
Note: If TA is paid to defray expenses made on traveling (not the same amount every month), than TA may not be considered for calculation of contribution of ESI
*Paid and Payable concept of Wages in ESI
Payable concept
An employee gets a gross salary of 11500 per month. Suppose on a particular month the employees’ gross salary due to leave without pay comes to 9500/-. It may be noted that ESI cannot be deducted from his salary (9500) just because the employees’ gross salary is less than 10000. The reason being, had the employee been present, he/she would have been paid a gross salary of 11500, which is outside the ceiling of 10000.
Paid concept
An employee gets gross salary of 9800 per month. Suppose on a particular month the employee draws a gross salary of 8000 due to leave without wages. In such a case the employees’ ESI contribution will be paid on 8000 and not on 9800, as the gross salary paid for that month is 8000.
Regards
From India, New Delhi
I hope the following explanation helps you
ESI will be calculated on WAGES that includes all remuneration paid or payable in cash to an employee, if the terms of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lockout, 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 traveling concession.
c) Any sum paid to a person employed to defray special expenses entailed on him by the nature of his employment.
d) Any gratuity payable on discharge
While calculating the coverage of ESI the OT paid to an employee should not be taken under consideration Sec2 (9)
But while calculating the contribution of ESI, the OT value should be taken under consideration
Sec2 (22)
E.g. Basic 2000
DA 2500
HRA 1500
TA 650
MA 750
Shift allowance 500
SPL Allowance 1200
Misc Allowance 500
OT 1000
Total = 10,600
Now in this case the employee whether should be covered under ESI or not will be found out by adding all the components other than OT, which comes to 9,600/- which is below 10,000/-, and as a result the employee is covered under the ESI Act.
But while calculating the contribution the amount of OT has to be taken as per the definition of “wages” of ESI Act and as a result the contribution of 4.75% will be calculated by taking the OT value under consideration i.e. 10,600/-
Note: If TA is paid to defray expenses made on traveling (not the same amount every month), than TA may not be considered for calculation of contribution of ESI
*Paid and Payable concept of Wages in ESI
Payable concept
An employee gets a gross salary of 11500 per month. Suppose on a particular month the employees’ gross salary due to leave without pay comes to 9500/-. It may be noted that ESI cannot be deducted from his salary (9500) just because the employees’ gross salary is less than 10000. The reason being, had the employee been present, he/she would have been paid a gross salary of 11500, which is outside the ceiling of 10000.
Paid concept
An employee gets gross salary of 9800 per month. Suppose on a particular month the employee draws a gross salary of 8000 due to leave without wages. In such a case the employees’ ESI contribution will be paid on 8000 and not on 9800, as the gross salary paid for that month is 8000.
Regards
From India, New Delhi
Dear Pratap,
ESI is applicable on gross earning salary upto 10000/month(excluding EPF/ESI contribution from employer,travelling allowances,not other part of CTC interms of special allowances from employer) and OT is also covered under ESI.
1.75% of gross salary from employee side and 4.75% from employer side.
Best Regards
Sajid Ansari-Delhi
From India, Delhi
ESI is applicable on gross earning salary upto 10000/month(excluding EPF/ESI contribution from employer,travelling allowances,not other part of CTC interms of special allowances from employer) and OT is also covered under ESI.
1.75% of gross salary from employee side and 4.75% from employer side.
Best Regards
Sajid Ansari-Delhi
From India, Delhi
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PF & ESI CALCULATION SHEET EXAMPLE.xls