February 29, 2024
Employees State Insurance Scheme (ESIC) Calculation on Gross Salary

Employees State Insurance Scheme (ESIC) Calculation on Gross Salary

ESIC calculation as per ESIC rules of act 1948

ESIC includes the medical benefit both for the employee and employer. It is calculated on the basis of gross salary/wages/pay per month and the maximum limit is up to ₹ 21,000/- per month (earlier it was ₹ 15,000 per month).

Minimum 20 eligible employees are required to get registered under ESIC.

Employer’s and Employee’s contribution

The employee’s contribution is 0.75% (earlier 1.75%) of gross salary (basic plus allowances), rounded to the next higher rupee. Employer’s contribution is 3.25% (earlier 4.75%) of gross salary payable to each employee, rounded off to next higher rupee.

So if the gross salary of an employee is ₹ 8,000 p.m, then

  • Employee contribution would be 8000*0.75% = ₹ 60
  • Employer 8000*3.25% = ₹ 260
  • Therefore Net pay = Gross pay – Total deductions

The contribution has to be paid within 21 days from close of the month. If the contribution is not paid in time, interest @ 12% is payable.

Gross Salary

Gross Salary means the cost to the company i.e .all the expenses incurred by the Company for any of its employee for a particular period(monthly/yearly).

Gross Salary includes

  • Basic pay
  • Dearness allowance
  • House rent allowance
  • City compensatory allowance
  • Overtime wages (but not to be taken into account for determining the coverage of an employee)
  • Payment for a day of rest
  • Production incentive
  • Bonus other than the statutory bonus
  • Night shift allowance
  • Heat, Gas & Dust allowance
  • Payment for unsubstituted holidays
  • Meal/food allowance
  • Suspension allowance
  • Lay off compensation
  • Children education allowance (not being reimbursement for actual tuition fee)

NOT to be included in Gross Salary

  • Contribution paid by the employer to any pension/provident fund or under the ESIC Act.
  • Sum paid to defray special expenses entailed by the nature of employment – Daily allowance paid for the period spent on tour.
  • Gratuity payable on discharge.
  • Pay in lieu of notice of retrenchment compensation
  • Benefits paid under the ESIC Scheme.
  • Encashment of leave
  • Payment of Inam which does not form part of the terms of employment.
  • Washing allowance for livery
  • Conveyance Amount towards reimbursement for duty related journey.

Points to Remember

  1. Those who are getting above ₹ 21,000/- gross per month is not covered under ESIC act.
  2. 20 eligible employees to get registered in ESIC
  3. Eligible employees mean those who are getting gross pay up to ₹ 21,000/- or less per month.
  4. The reduced rate of contribution of the employees from 1.75% to 0.75% and employers from 4.75% to 3.25% will be effective from 1st July 2019.

I have covered almost all types of allowances and perquisites which an employee can get. Please have your say in the comment space below, in case of any mistake or query.

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