Salary Limit for ESIC Deduction
The Indian government founded the Employees’ State Insurance Corporation (ESIC) in 1948 as a social security agency. Its main goal is to give workers financial help in the event of illness, disability, or death. The government sets the maximum wage for which ESIC deductions are allowed.
Organisations with more than ten employees are subject to the ESIC plan, and both the employer and the employee must contribute to the ESIC fund. The contributions are determined using a portion of the worker’s pay.
Employers can easily complete the ESIC Deduction online form and send their ESIC contributions. This form, which may be found on the official ESIC website, asks for some basic details about the company and employee.
Following form submission, the employer can use a credit card, debit card, or net banking to make ESIC contributions using the online portal.
Why is ESI important for the Indian Economy?
The Employees’ State Insurance Act of 1948 established the social security programme known as ESI, which the Indian government provides. Employees are protected under the plan against disability or death resulting from illness, pregnancy, or work-related accidents. Employees must be enrolled in the programme to receive medical treatment and other benefits. The program’s financial aid could compensate for the employees’ lost wages due to medical issues.
This is a self-financing programme in which employers and employees contribute to it on a regular monthly basis at a fixed percentage of their salaries.
Any business that employs ten or more people is subject to ESI, including retail stores, lodging facilities, restaurants that aren’t involved in manufacturing, movie theatres, motor vehicle dealerships, newspapers, and private schools and hospitals.
States like Maharashtra, Meghalaya, Mizoram, Goa, Nagaland, Chandigarh, and Assam-20; Jharkhand, Haryana, Karnataka, Rajasthan, Tripura, West Bengal, Andhra Pradesh, and Delhi-10 have different minimum employee requirements to be eligible for the ESI plan.
Limit of ESIC Deduction
The government sets and updates the annual salary cap for ESIC deductions. The monthly salary ceiling for ESIC deduction is ₹ 21,000 as per current regulations. This implies that neither the employer nor the employee must contribute to the ESIC fund if the employee’s monthly income exceeds ₹ 21,000.
On the other hand, the employer and the employee must contribute to the ESIC fund if the employee’s monthly wage is less than ₹ 21,000.
Advantages of the ESIC Deduction
Workers who make contributions to the ESIC fund are qualified for several advantages, such as:
- Health Advantage: Hospitalisation and outpatient care are among the medical benefits available to employees who contribute to the ESIC fund. A network of ESIC hospitals and pharmacies offers medical benefits.
- Benefit in Sickness / Illness: If an employee cannot work because of an illness or accident, they are entitled to sick leave benefits. The benefit is payable for a maximum of 91 days per year and is computed as a percentage of the employee’s average daily wage.
- Benefit for Disablement: Workers who cannot work due to an accident or injury that renders them disabled are entitled to disability compensation. The benefit is payable for a maximum of two years and is determined by considering the employee’s average daily earnings.
- The dependants can avail of ESIC Deductions: The dependent benefit is payable to an employee’s dependents in the event of their death. The benefit is paid to the dependents until they turn 25 or find employment, whichever comes first. It is computed using the employee’s average daily earnings.
- Benefit for Maternity: If a female employee’s pregnancy or childbirth prevents her from working, she may be eligible for maternity benefits. The benefit is payable for a maximum of 12 weeks and is computed using the employee’s average daily wage.
Contribution Calculation for ESIC Deduction
A proportion of the employee’s pay is used to compute the company’s and employee contributions. The company contributes 4.75% of the pay, while the employee contributes 1.75% under current regulations.
An employee earning ₹ 20,000 a month, for instance, would contribute ₹ 350 (1.75% of ₹ 20,000), whereas the employer would contribute ₹ 950 (4.75% of ₹ 20,000).
ESI in the Event of a Pay Increase
The ESI system covers up to Rs. 21,000 per month for employees. Employees’ ESI coverage is not instantly cancelled when their salary rises above this cap. Rather, they stay protected under the ESI plan till the conclusion of the current payment term.
Suppose an employee’s income increases from Rs. 18,000 in April to Rs. 23,000 in June, for instance. In that case, they will be eligible to continue contributing to the ESI plan and receiving benefits until September 30th. But as of October 1st, they will no longer be qualified for ESI coverage because their salary surpasses the qualifying threshold.
This clause protects workers from losing out on ESI benefits due to an unexpected pay increase. Should the need arise, it also gives them plenty of time to locate other health insurance.
Duration of Participation and Contribution
Unique to the Employees’ State Insurance (ESI) programme are “contribution periods” and “benefit periods.” The two parts of the calendar year are separated by these periods, which correspond to each other.
- Contribution Period: This is the time frame in which money is sent to the ESI programme. Normally, contributions are accepted between April 1 and September 30 and between October 1 and March 31 of the subsequent year.
- Benefit Period: This is when an employee is qualified to receive health, maternity, and disability benefits as part of the Employee Security Insurance (ESI). Usually, the reward period follows the contribution period by one calendar year. For example, an employee who makes contributions between April 1st and September 30th is qualified to collect ESI benefits in the following year between January 1st and June 30th.
This system of contribution and benefit periods aims to guarantee that an employee will continue to receive ESI benefits through the end of the associated benefit period, even if their pay exceeds the ESI eligibility limit during the contribution period.
Based on certain surveys and studies conducted, it was reported that along with all the importance and advantages that the ESIC offers, certain disadvantages are associated with it.
Some of these include:
- Unlike other insurance providers, which have automated their functionalities, the ESIC process is cumbersome and difficult as well as time-consuming for the consumers, making the process difficult and long.
- They also reported that there is a prolonged waiting period for the availing of the services.
- As a cherry on top, which is also a common issue in the country, the rude behaviour of the staff of the dispensary or the facilities makes reliability on the same difficult.
- The timing of the dispensaries is another problem or issue highlighted by the holders.
- Again, another major limitation is that the salary limit is ₹ 21,000, which is to be increased by putting in the economy and other associated parameters.
Conclusion
Employees are covered financially by the Employees’ State Insurance Corporation (ESIC), a social security agency, in case of illness, disability, or death. If an employee’s salary is less than ₹ 21,000 per month, both the employer and the employee must contribute to the ESIC fund. This is the monthly wage limit for ESIC deductions.
Employees can confirm their eligibility for ESIC benefits, and employers can make sure they make the necessary contributions by being aware of the wage limit. It’s not always easy to hold on to the ESIC, and ensuring its compliance and computations is another issue every employer faces.
With globalization engulfing the world, the Indian economy is also on the verge of developing itself. Technical breakthroughs and economic reforms are a part of that. But the country is also focusing on sustainable growth such that it is online and not an unhealthy pace of growth. For the same reason, the ESI becomes vital for the country as it ensures social security benefits and much more to the people of the country. This also increases economic productivity by developing a happy workplace that encourages people’s satisfaction.
Kanakkupillai can guarantee compliance with legal and regulatory standards, offer thorough support during the ESIC registration process, and assist customers in utilising ESICs to achieve their objectives. Experts at Kanakkupillai are fully equipped to provide you with the assistance required to handle all the queries and issues associated with the ESI registration, computation, and remittance, along with the filing of the reports or compliances. Please take action today to lighten up your work and strategize your operational activities by calling us at 7305 345 345 today!!!
