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 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
- Those who are getting above ₹ 21,000/- gross per month is not covered under ESIC act.
- 20 eligible employees to get registered in ESIC
- Eligible employees mean those who are getting gross pay up to ₹ 21,000/- or less per month.
- 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.