ESI
Date : 05th Jul 2020
On June 13, 2020, the Ministry of Labour and Employment,
Government of India, issued a notification amending Rule 51 of the Employees'
State Insurance (Central) Rules 1950 to reduce the rate of the contribution
required to be made under the Employees' State Insurance Act 1948 (ESI Act)
from 6.5 % (employer 4.75% and employee 1.75%) to 4% (employer 3.25% and
employee 0.75%). The notification declares July 1, 2020 as the date on
which the reduced rates of contribution take effect.
A. Tracing the Background and Revisions in Contribution
Rates :-
The ESI Act is applicable to every factory and every
establishment (including corporates, factories,
restaurants, cinema theatres, offices, medical and other institutions. Such
units are called Covered Units)
where 10 or more people are employed. However, the
threshold for coverage of establishments is more than 10 employees in the state
of Maharashtra (20), Gujarat, and Pune, etc. The ESI Act provides for coverage
of employees employed for wages on the premises of the establishment where such
employees earn ₹21,000 per month or less. Once an establishment is covered
under the ESI Act, it continues to be covered, notwithstanding the fact that
the number of persons employed therein at any time falls below the limit as set
out above. Under Section 39 of the ESI Act, the employer is responsible for
making contributions in respect of an employee to the Employees' State
Insurance Corporation with respect to each wage period within 21 days from the
last day of the calendar month.
B. Calculation procedure :-
ESI contributions are calculated on the
employee’s monthly gross salary which includes the below :-
ü Basic pay,
ü Dearness allowance,
ü City compensatory allowance,
ü House Rent Allowance (HRA),
ü Incentives (including sales commissions),
ü Attendance and overtime payments,
ü Meal allowance,
ü Uniform allowance and
ü Any other special allowances, etc.
however, does not include the below items to calculate gross salary :-
X
Over time allowance,
X Annual bonus (Diwali bonus),
X Retrenchment compensation,
X Encashment of leave,
X Gratuity.
Employees earning daily average wage up to
Rs.176 are exempted from ESIC contribution.
In case, the gross salary of the employee exceeds Rs.21,000 during the
contribution period (explained below), the ESI contributions would be
calculated on the new salary and not on Rs 21,000. For example, if the salary
of an employee increases to Rs. 22,000 per month, then the ESI would be
calculated on Rs. 22,000 instead of Rs. 21,000 during the contribution period.
C.
Contribution Period and Benefit Period :-
Payroll
administrators often face confusion when employee’s salaries change especially
when the monthly gross salary exceeds the ESI limits of Rs 21,000. To handle
this situation, ESI has a concept of contribution periods during which the ESI
contributions have to continue, even when the salary exceeds the maximum
limits. There are two contribution periods each of 6 months duration and two
corresponding benefit periods also of six months duration.
|
Contribution period |
Cash benefit period |
|
01st
April to 30th September |
01st
January of the following year to 30th June |
|
01st
October to 31st March of the following year |
01st
July to 31st December |
After
the commencement of a contribution period, even if the monthly gross salary of
an employee exceeds Rs.21,000, the employee continues to be covered under ESI
scheme till the end of that contribution period. For example, if an employee’s
gross salary increases in June from Rs.18,000 (within ESI limit) to Rs. 22,000
(above ESI limit), the deductions for ESI will continue to happen till the end
of the ESI contribution period i.e. September, and the deduction amount for
both the employee and employer will be calculated on the increased gross salary
of Rs. 22,000. At the end of the contribution period, if the employee salary is
more than the ESI limit, no further deductions and contributions are required.
The employee will still be covered under ESI till 30th June of the following
year. Similar rules apply when an employee’s salary increases in the 2nd
contribution period.
Due Dates – ESI :-
\ESI payment due date:
ESI
contribution has to be deducted every month from the employee and it has to be
contributed to the department. So ESI payment due date is monthly, on or before
the 15th of next month. It is similar to PF in this respect.
ESI return due date:
ESI return is done on a half-yearly basis and the due
dates are fixed as 11th of November and May.
|
Type |
Due date |
|
ESI payment due date |
On or before 15th of every month |
|
ESI Return due date |
11th of Nov and 11th of may |
ESI interest:
An employer who does not pay the contribution within the
time limit shall be liable to pay simple interest at the rate of 12% per annum
for each day of the default or delay in payment of contribution.
|
Payroll category |
Payment Due date |
Returns filing |
|
|
Type of return |
Filing Due date |
||
|
ESI |
15th of every
month |
Half-yearly |
11th of Nov and
May |
Thank you,
Chandra Sekhar Reddy
Author and Sole proprietor,
SCR Gallery
Website : https://www.scrgallery.com
Blogger : https://scrgalleryindia.blogspot.com/
E-mail : scr@scrgallery.com
No comments:
Post a Comment