ESIC amount vary monthly depending on Incentive amount?

Hello Everyone,

I need better clarification on ESIC deduction. ESIC is deducted from a gross salary of 21000/-. What happens if the company pays an amount in incentive monthly?

For example, "X" salary details for Nov'16 are Basic- 6500, HRA- 3000, Special Allowance- 425, Conveyance-1600, Other allowance- 5474, Incentive-9750 (which is not fixed and varies based on sales targets achieved).

Could you please advise on the ESIC deduction? Also, could you clarify if the ESIC amount varies monthly depending on the Incentive amount?

Thank you.

Dear Ms. Shweta,

Variable pay cannot be considered for ESI deduction because it is not determined as a constant component of the earnings. These variables may or may not be paid by the employer at times, which will affect your ESI contribution every month (EE & ER). The consideration of fixed earning components (which depends on present days) should be taken into account for statutory deductions.

I hope the above clarification will be helpful for you.

Incentive paid on a monthly basis for ESI-covered employees comes under the definition of salary, warranting ESI deduction. Variation in gross salary paid to an ESI-covered employee consequent to the payment of incentive on a monthly basis is okay. However, ESI deduction should be made on gross salary, including the incentive.

If an employee's gross salary is Rs. 18,000 and they receive monthly incentives, what would be their ESIC deductions?