ESI Calculation With Examples : 2023

ESI Calculation – Self-contributory social security and health insurance is offered through ESI. Employee State Insurance is the full name of this insurance. The programme provides financial support to an employee at times of illness, pregnancy, and work-related injuries. Additionally, it provides coverage for the employee’s family members’ medical costs. Establishments or non-seasonal factories having a minimum salary of INR 21,000 and more than 10 employees (or 20 in some states) should register with ESI. Additionally, within 15 days on the date of its applicability, the entity must register. This article goes into great detail regarding the various wage inclusions and exclusions as per the ESI Act and ESI Calculation.

ESI Contribution

Employee State Insurance (ESI) is a social security programme that covers workers in businesses that meet the requirements of the ESI Act. Both the employer’s and the employee’s contributions are included in the ESI contribution for an employee.

The contribution rates are set and periodically updated. The employer currently contributes 3.25% of the employee’s salary towards ESI. While the employee contributes 0.75% of their salary towards ESI.

Additionally, employees whose daily average income is up to INR 137 are excluded from the contribution payment. Employers must, however, make their contribution to these workers.

ESI Calculation – How to Calculate ESI?

The ESI contributions are calculated depending on the employee earnings. The following are the employer and employee ESI contributions:

• Employer’s Share of Insurance (ESI): 3.25% of Payable Wages
• Employees’ Share of Insurance Contribution: 0.75% of Payable Wages

ESI Calculation on Salary

Let’s use an example to clarify the ESI contribution computation. Let’s assume that Mr. Anuj is employed by a location that meets ESI Act requirements. Mr. Anuj receives a salary of INR 15,000 every month. The following is the contribution to the Employee State Insurance Scheme:

Employer Contribution: INR 15,000 x 3.25% = INR 487.50

Employee Contribution: INR 15,000 multiplied by 0.75% equals INR 112.50.

487.5 + 112.5 = 600 INR is the total ESI contribution.

Employee State Insurance Contribution Collection

Each employee’s employer is responsible for covering his portion of the contribution and deducting it from the employee’s wage bills. In addition, the employer is required to give the Corporation the contributions within 15 days of the end of the month in which they are due.

The Corporation has given a few other banks and a few State Bank of India branches permission to take payments on its behalf.

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Contribution Period and Benefit Period

The contribution period for the ESI plan is 6 months. Consequently, a year has two contribution periods. Additionally, there is a 6-month-long reward period that corresponds to each contribution period. The contribution periods and associated benefit periods are listed below:

• The cash benefit term for the contribution period of 1 April to 30 September is 1 January to 30 June of the following year.
• The cash benefit period for the contribution period, which runs from 1 October to 31 March of the following year, is 1 July to 31 December.

The concept of the contribution period is advantageous to an employee whose income increases above the threshold.

For instance, if your pay was INR 20,000 in May 2022, it will increase to INR 23,000 starting in June 2022. For ESI calculation reasons, the contributions up until September 30, 2022, will be taken into account on the amended salary of INR 23,00. After then, you won’t be eligible for the ESI contribution. since INR 21,000 is the pay threshold. You will, however, be qualified for the corresponding benefit period, which runs from 1 January 2023 to 30 June 2023.

Frequently Asked Questions