ESIC provides social security to employees in case of sickness, disability, or death. The salary limit for ESIC deduction is ₹ 21,000 per month.
The Employees’ State Insurance Corporation (ESIC) is a social security organization established by the Indian government in 1948. Its primary objective is to provide financial support to employees in case of sickness, disability, or death. The ESIC salary limit is decided by the government
The ESIC scheme applies to organizations with more than 10 employees, and the employer and employee must contribute to the ESIC fund. The contributions are calculated based on a percentage of the employee’s salary.
Employers can easily submit ESIC contributions online by filling out the ESIC Deduction online form. This form is available on the official ESIC website and requires basic information about the employee and the employer. Once the form is submitted, the employer can make the ESIC contributions through the online portal using a credit card, debit card, or net banking.
ESIC Deduction Limit
The ESIC salary limit is reviewed annually, taking into account factors such as inflation, economic conditions, and the recommendations of the Pay Commission. As per the current norms, the salary limit for ESIC deduction is ₹ 21,000 per month. This means that if an employee’s salary exceeds ₹ 21,000 per month, the employee and the employer are not required to contribute to the ESIC fund. However, if the employee’s salary is less than ₹ 21,000 per month, both parties must contribute.
ESIC Deduction Online Form
Employers can contribute to the ESIC fund by completing the online form. The form is available on the official website of the Employees’ State Insurance Corporation.
Employers must fill out the online form every month and make the contributions within 15 days of the end of the month. The online form is user-friendly and easy to use, and employers can make contributions from the comfort of their office or home.
Benefits of ESIC Deduction
Employees who contribute to the ESIC fund are eligible for several benefits, including:
Sickness Benefit
Employees are eligible for sickness benefits if they cannot attend work due to illness or injury. The benefit is calculated based on a percentage of the employee’s average daily wage and is payable for a maximum of 91 days in a year.
Disablement Benefit
Employees are eligible for disablement benefits if they cannot attend work due to an accident or injury leading to disability. The benefit is calculated based on the employee’s average daily wage and is payable for a maximum of 2 years.
Maternity Benefit
Female employees are eligible for maternity benefits if they cannot attend work due to pregnancy or childbirth. The benefit is calculated based on the employee’s average daily wage and is payable for a maximum of 12 weeks.
ESIC Deduction Dependent Benefit
In case of an employee’s death, the dependents are eligible for the dependent benefit. The benefit is calculated based on the employee’s average daily wage and is payable to the dependents until they reach the age of 25 years or get employed, whichever is earlier.
Medical Benefit
Employees contributing to the ESIC fund are eligible for medical benefits, including hospitalization and outpatient treatment. The medical benefits are provided through a network of ESIC hospitals and dispensaries.
ESIC Deduction Calculation of Contributions
The contributions made by the employee and the employer are calculated based on a percentage of the employee’s salary. Per the current norms, the employee’s contribution is 1.75% of the salary, and the employer’s contribution is 4.75% of the salary.
For example: If an employee’s salary is ₹ 20,000 per month, the employee’s contribution will be ₹ 350 (1.75% of ₹ 20,000), and the employer’s contribution will be ₹ 950 (4.75% of ₹ 20,000).
ESI in Case of Salary Increase
The ESI scheme covers employees with a monthly salary of up to Rs. 21,000. When an employee’s salary increases beyond this threshold, their ESI coverage is not immediately terminated. Instead, they continue to be covered under the ESI scheme until the end of the current contribution period.
For example, if an employee’s salary is Rs. 18,000 in April and increases to Rs. 23,000 in June, they will continue to contribute to the ESI scheme and receive ESI benefits until September 30th. However, they will not be eligible for ESI coverage from October 1st onwards, as their salary exceeds the eligibility limit.
This provision ensures that employees do not lose out on ESI benefits due to a sudden salary increase. It also provides them with ample time to find alternative health insurance coverage if necessary.
Period of Contribution
The Employees’ State Insurance (ESI) scheme has a unique concept of “contribution periods” and “benefit periods.” These periods divide the calendar year into two halves, each corresponding to the other.
- Contribution Period: This is the period during which contributions are made towards the ESI scheme. The contribution period is typically from April 1st to September 30th and from October 1st to March 31st of the following year.
- Benefit Period: This is the period during which an employee is eligible to receive ESI benefits, such as medical care, maternity benefits, and disability benefits. The benefit period typically corresponds to the next calendar year after the contribution period. For instance, an employee who contributes during the contribution period from April 1st to September 30th is eligible to receive ESI benefits during the benefit period from January 1st to June 30th of the following year.
This system of contribution and benefit periods is designed to ensure that even if an employee’s salary crosses the ESIC Salary limit during the contribution period, they continue to receive ESI benefits until the end of the corresponding benefit period.
Conclusion
The Employees’ State Insurance Corporation (ESIC) is a vital social security organization that provides financial support to employees in case of sickness, disability, or death. The ESIC salary limit for deduction is ₹ 21,000 per month, and both the employee and the employer must contribute to the ESIC fund if the employee’s salary is less than this limit. The Pay Commission’s recommendations, particularly those reflected in the 7th Pay Matrix, can influence these salary limits, ensuring they remain aligned with the evolving economic conditions and employee needs.
The 7th Pay Matrix, implemented as part of the 7th Pay Commission, brought significant changes to the pay structure of government employees, which, in turn, affected various thresholds like the ESIC salary limit. By understanding the ESIC salary limit and the potential impact of Pay Commission recommendations, employees can ensure they are eligible for ESIC benefits, and employers can ensure that they make the correct contributions.
Vakilsearch can provide comprehensive support throughout the ESIC registration process, ensuring compliance with legal and regulatory requirements and helping clients achieve their goals using ESIC.
Frequently Asked Questions
Is ESIC applicable for a 25,000 salary?
Yes, ESIC (Employee State Insurance Corporation) is applicable for a salary of ₹25,000 or less per month. Employees earning below this threshold are eligible for ESIC benefits such as medical care, maternity leave, sickness benefits, and more.
What is the maximum salary limit for ESI?
The maximum salary limit for ESI (Employee State Insurance) is ₹21,000 per month. Employees earning up to this amount are covered under the ESI scheme, which provides various social security benefits to workers and their dependents, including medical, maternity, disability, and unemployment benefits.
Can we continue ESI after my salary crosses ₹21000?
Once an employee's salary surpasses the ₹21,000 threshold, they typically exit the ESI scheme. However, if an employee's salary increases beyond this limit due to a raise, promotion, or any other reason, they can continue to avail ESI benefits for the remainder of the contribution period, usually six months.
What is the salary limit for an ESIC increase?
The salary limit for an ESIC increase is determined periodically by the government. It may be revised based on factors such as inflation, economic conditions, and policy changes. Employers and employees should stay updated on any modifications to ensure compliance with ESI regulations.
How is ESI calculated from salary?
ESI contribution is calculated as a percentage of an employee's gross salary. The current contribution rate is 1.75% for employees and 4.75% for employers, totaling 6.5% of the employee's gross salary. The employer deducts the employee's share and contributes both portions to the ESIC every month.
