Strange Issue Of ESIC Deduction.

Hi Friends,

I am in a software company and we have resources on third party rolls with our partner which are organisational entities in itself.

Now i have received a strange query from resource when our partner has deducted his ESIC contribution despite him being out of ESIC bracket having salary of 18k per month.

When asked partner responded with " as you joined in the mid of the month you fell under ESIC and now since it is deducted you'll have to contribute for 6 months as to come out of ESIC it takes minimum of 6 months"

This is the most ridiculous argument i have ever recieved in my 4 yrs career in HR especially in legal and compensation and benefits area.

They deducted it according to their whims and fancy and now they are saying that it'll keep on getting deducted for another 5 months!!!!!

I have asked them to revert the money to the resource but is there any thing in the law which talks about half month salary coverage under ESIC, although it sounds ridiculous because if someone's gross is 50k and his salary is processed for 5 days which will amount to less than 10k can he be under ESIC?

Please share your views on the same.

Thanks!!

Regards,
Dhoop

As per ESI rules, an employee already covered will remain covered till the end of the contribution period (maximum 6 months) when his salary exceeds Rs 10000 during such contribution period. Contribution period means a period of six months from 1st April to 30th September and from 1st October to 31st March. Therefore, if the salary of a covered employee increases beyond Rs 10000 in the month of January, then he will be covered and has to contribute till 31st March and will become out of cover only in April.
In your case, whether he is an existing member or the date on which his salary increased to Rs 18000 is not clear. If the salary hike has taken place only during this contribution period, there is nothing wrong in deducting ESI till the end of present contribution period. However, if he is not a covered employee, the question of coming to coverage for 6 months will not arise.
Regards,
Madhu.T.K

Dear Dhoop,
When asked partner responded with " as you joined in the mid of the month you fell under ESIC and now since it is deducted you'll have to contribute for 6 months as to come out of ESIC it takes minimum of 6 months"
The comment made by ur partners is correct. I have been witness of same query in our company.
Regards
Vipin

Hi Madhu,
Thanks for the reply.
The employee's Monthly Gross is 18000Rs. but as he joined in mid of the month the salary paid to him for half month was less than 10k and thus our partner has deducted ESIC.
Now please tell me is it correct to deduct ESIC if his monthly gross is above 18k and just because he worked for few days in a month he has to pay ESIC contribution?
Thanks!!
Dhoop

Dear Dhoop
Your resources department is useless.If you join inbetween of month and got 15 days salary and that was less than 10 k ,so u became a member of ESIC.what a surprise logic given by resources dept?
your salary is 18 k at the time of joining and you are exempted employee from the day one.i donot understand that what a resources dept?
tks
js malik

Hi Dhoop,
What had happened in your case is really funny.
I think it may be the problem of the software they use or programmed excel sheet, that automatically will calculate the ESI amount of persons having salary less than 10,000/-. Go to your HR Manager and discuss with him for a solution.
Jishnu.V.Nair
Tax & EPF Consultant
Kerala
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So in this logic if someone goes without pay for any month and falls below the ceiling he will be a member of ESIC? That never happens. Conversely it also never happens that if a coverable employee exceeds the ceiling on any month by virtue of OT payments (which happens often) for that particular month his ESI is not deducted. ESI rule is very clear about that.

You are not coverable as you have performed work for 14-15 days and have been paid Rs. 9000 ( half your salary ).
You are not at all eligible for coverage.
If they do not listen, do not despair, enjoy the facilities of ESIC, go on a sick leave for 10 days, get paid from company and get paid from ESIC.
The company ends up contributing nearly 3 times your contribution and therefore they are the bigger loosers.

Dear Dhoop,
Yes it is really a unique problem but a clear one as well other senior members also have pointed out that they cannot deduct the ESIC in this case. Please clear this matter out because if they contiune doing this than they can be in problem future if someone takes some legal action against them. This can affect to your company also as principal employer.
Regards,
Sandeep Kulkarni

Hello Mr. Madhu!
I have a confusion, if the salary of an employee was less than 10000/- till March and was contributing ESIC now he got promoted and with effect from April his salary is 12000/-. In this case will his contribution to ESIC stop or will continue till September?