ESI contribution
The ESI contribution {Employment State Insurance} is a contributory fund that is contributed by both the employee and the employer. It enables the employee’s in India to take paths in a self-financed, Health care, Insurance fund.
Who manages this Scheme?
This Scheme is administered by the Employee State Insurance Corporation, a comment body controlled by the ESI act 1948. The ESI is one of the most significant integrated need based social insurance schemes for employees. It protects the employee’s in unfortunate events and uncertain times.
Who is covered under ESI
All non-seasonal factories having more than ten employees are covered under ESI. And all the establishments that are covered under the factory act or shops or establishments are also eligible for ESI.
Wages as per ESI Act
The contribution made by the employee and the employer is made on basic wages paid to the employees.
Some of the inclusion and exclusions under this are as follows:-
| Inclusions | Exclusions |
| Basic Pay | Entertainment Allowance |
| Dearness Allowance | Retrenchment Compensation |
| City Compensatory Allowance | Encashment of leave and gratuity |
| House Rent Allowance | Deduction of health insurance |
| Incentives (including sales commission) | Tax Deductions |
| Medical Allowance | – |
| Meal allowance | – |
| Any other special allowances | – |
| Attendance and Overtime Payments | – |
Collection of Contribution
An employer is responsible for paying his contribution for each employee and deducting the employee’s contribution from the wages bill. They must pay these contributions to the Corporation at the specified rates within fifteen dates of the last day of the calendar month in which the aidings are due.
Contribution Period and Benefit Period
The concept of contribution period protects the employee if their wages rise above the Rs. 21,000.
Let us continue with the above example, say Mr AHJD was receiving wages of Rs. 18,000 till June 2020, the wages increase to Rs. 22,000 from July 2020. The aiding period is 1 st April 2020 – 30th September 2020. Hence, the reduction will continue on the revised salary up to September, and he will be eligible for the advantage up to 30th June of the following year.
Similarly, say an employee Mr YUIO earns a wage of Rs. 20,000 till October 2020, and from next month he earns Rs. 23,000. The decrease must continue on the revised salary up to 31st March 2021, and he will be eligible for the bonus up to December 2021.
| Name | Salary Revision | Contribution Period | Benefit Period |
| Mr AHJD | July 2020 | 1 st April 2020 – 30th September 2020 | 1st January to June 2021 |
| Mr YUIO | November 2020 | 1st October to 31st March 2021 | 1st July to 31st December |
As a consequence, both the employee and the employer must contribute to ESI, and the benefits assist the employee in dire circumstances.
