TaxTMI 
TaxTMI 
TaxTMI 
There are several deductions made from the salary of an employee every month and they do not have the required knowledge about the contributions that they are making. For instance, EPF is the income and retirement benefits scheme that employees earning less than INR 15,000 are bound to pay for. Another similar deduction is the Employees’ State Insurance. It is a health indemnity/ social security scheme that Indian workers enjoy.
This government regime is supervised and controlled by the Employees’ State Insurance Corporation under the ESI Act, 1948. The plan was laid out in the interest of employees to collect and cover the funds for medical benefits, disability benefits, maternity benefits, unemployment allowance and other kinds of financial protections. Now that you have understood what is ESI, it is time to take a look at the current functioning and amendments in the same:
The Eligibility
Employees that earn a monthly wage of INR 21,000 or below compulsorily contribute towards the ESI scheme. However, for those who have a per day salary of INR 176 or less need not to pay the due amount. The employers will pay their share and the part of such employees’ will be taken care of by the government.
The Registration
As per the online ESIC registration system, the appointment date is the same as the employee registration date. Also, the process is such that it allows a maximum of 10 days to register a new employee under the scheme.
For companies not registered under The ESIC Act:
Companies that have an employee base of more than 20 must be registered under the act.
For companies already registered under The ESIC Act:
These organizations need to rework the CTC of all the employees who have a monthly gross salary of INR 21,000 or less.
The Contribution
Both the employer and the employee contribute to collect the funds for the ESI scheme. Earlier this contribution was 6.5% in total with 4.75% as the employer’s fund and remaining 1.75% as the employee’s part. But now, as per the latest ESIC rule, the employee’s contribution is 0.75% and the employer’s share is 3.25% making it a total of 4% of the employee’s monthly wages.
The Calculation
ESI calculation comprises of various elements of an employee’s monthly salary such as Basic Pay, Dearness Allowance, City Compensatory Allowance, HRA, Incentives, Attendance and Overtime Payments, Meal Allowance, Uniform Allowance and other special allowances.
In order to do the math, let us suppose that the employee’s Gross Salary is INR 15,000 a month.
Now, the employer’s contribution would be = 3.25/100 * 15,000 = 487.5, and
The employee’s contribution would be = 0.75/100 * 15,000 = 112.5
Hence, the total ESI contribution in this case is INR 600
The Deadline
The contribution made by the employee towards ESI should be deposited within the due date. It is not possible to deposit the contribution online after 42 days from the end date of the contribution period.