The new ESI wage ceiling – Applicability and Impact
4 minutes read

The new ESI wage ceiling – Applicability and Impact

Introduction

Employees’ State Insurance or ESI is the insurance which provides medical care to industrial workers and other employees. You can use this insurance in case of sickness, maternity, injury and other medical-related matters.

The ESIC has now increased the wage limit for the ESI Act to Rs 21,000. The wage ceiling was last raised in May 2010. Back then, the wage limit was increased from Rs 10,000 to Rs 15,000. Now the wage limit has been raised to Rs 21,000. This brings it in line with the wage limit for the Payment of Bonus Act.

ESI wage ceiling for the past 20 years

ESI wage ceiling for past 20 years

Impact of increase in the ESI wage ceiling

  • The increase in the wage ceiling for ESI from Rs 15,000 to Rs 21,000 means that an employer makes contributions for more number of employees earning between this limit. The important factor to decide whether an employee covers under the ESI Act is whether the employee’s monthly ‘wages’ exceeds Rs 21,000.
  • The wages here mean an employee’s gross earnings. I.e.,  The total of all earning heads.
  • The increase in wage ceiling impacts the finances of the employees. For the ESI Scheme contributions are made from both employers (4.75%) and employees (1.75%). So, the take-home salary of employees earning between Rs 15,000 to Rs 21,000 decreases as the employee contribution of 1.75%  deducts from their salaries.
  • Once an employee starts earning a wage of more than Rs 21,000, ESI contributions will be made only till the end of the contribution period. It is a 6-month period.
    • E.g.: Consider that an employees’ gross earning is Rs. 20,000  in April. In July, that person gets an increment which leads him out of ESI coverage i.e, salary increases to Rs. 25,000.
    • In this case, the employee will continue to contribute 1.75% for ESI on Rs. 25,000 from July to September. From the second half of the year i.e., October to March there will be no contribution towards ESI.

With the rise in the wage threshold, about 3.5 million employees will now fall under the ESI Act. From a company’s perspective, we see that the impact of this change is a financial one.

The ESI notification of the amendment is here: Find the notification here.

P. S: For users of our Saral PayPack Software, we have updated the ESI rates to the latest ceiling. Please ensure you are using the more recent version of the software.

If you are not a user, you can try our software for free. Do check it out.

Image made with the help of icons from Freepik, licensed under CC 3.0 BY

52 Comments

  • Useful info..
    For ESI Registration follow the link in profile

  • If a particular employee gross salary will be above 21000, (Out of ESI) in that case we are not deducting ESI. Due to absence/LOP his gross will be below 21000( Less than 21000) can we start deduction for further months (April to Sep) (oct to Mar).
    Can you help

  • Hi
    If ALL employees salaries are Above Rs 21, 000 , do we have to register under ESI act ?
    And file NIL return? Or can we seek exemption?

    Number of employees are exceeding 20 .

    • Hi Joy,
      Yes, the registration is mandatory once you cross 10 counts (except few). But no return is required to be filed except there is any employee having less than Rs. 21000 gross salary.

      • Hi Team,

        Our company is registered under ESIC and none of our employees’ Gross salary is less than 21K. Do we have to register our employees on the portal?
        If yes, should we then file Nil returns?

        We have not filed any returns so far.

        Also, is there any annual return to be filed?
        Kindly advise.
        Thank you.

        • As no employee is below 21k, it is not required to register them on the portal nor you are required to file NIL return.

          • Dear Team,
            Thank you for the prompt reply.

            Would like more information here.

            We haven’t logged on to the portal after receiving the registration letter with the login details. So, we havent registered any employee.
            What possible action will the ESIC department take?

            Now we are unable to login with the user ID & password. The company has been allotted a LIN. How do we proceed to understand if there is any requirement from our end?

            Should we visit the ESIC office?

            Kindly advise.

            Regards

          • Yes, please visit your ESIC Office.

      • If a particular employee gross salary is above 21000, (Out of ESI) in that case we are not deducting ESI. In case, Due to absence/LOP, If his gross will fall below 21000( Less than 21000), In this case how about that particular month Contributions ? Are you we need to project shortfall period on pro rata basis to arrive monthly Gross Salary projection.

        Pls advise on this topic

  • I am vishwanath, from Hyderabad. I get monthly salry 23000/-. Esi contribution. Details

  • my salary is morethan 21000 in hand but previously i was getting less so i can check the esic portal and i am seeing the amount.

    But now the salary increased so can i still be able to claim esic for my family as i think the contribution will not be there for esic from now.

    i can be able to claim that or the esic amount will simply wasted.????

    I am getting confusion, can you people clarify.

    • Hi,
      If your salary has recently increased, then your ESIC will be active till current half-year. E.g. You where under ESIC in Apr & May month, In June your salary is increased and it is above 21,000. Then, you and the dependent family will be eligible for ESIC benefit till Sept. After that you will be out of ESIC and there will be no contribution to your account.

  • Hi,
    My salary has increased from 21000 and esic is still getting deducted in that case can I avail the benefit of esic.

    • Hi,
      If your salary has recently increased, then your ESIC will be active till current half-year. E.g. You where under ESIC in Apr & May month, In June your salary is increased and it is above 21,000. Then, you and the dependent family will be eligible for ESIC benefit till Sept. After that you will be out of ESIC and there will be no contribution to your account.

  • Hi,

    If wage limit exceeds Rs 21000 on 1st April 2019 for an existing employees who is earlier contributed under ESIC coverage, while uploading ESIC return his IP number reflects in the Monthly returns. What reason we should choose to remove that particular employee.

    • Out of Coverage – 4

      • and what should be last working day??? when filing oct month return, should it be 30-09-2019???

        • Yes.

  • Currently my CTC Is 23500 from June 2019, Still, ESI is getting deducted from my salary. As I asked to unroll my name from ESI deduction, I got the answer – ” your gross is not above 21000 so you will be covered under ESI”. I have gone through esic.nic.in govt website where they never mentioned it in terms of gross. Please let me know will I will be covered under ESI or not

    • Your CTC is not your Gross salary and ESI is based on your Gross Salary. Please check if your Gross is less than 21K. If yes, you are covered under ESIC.

  • Hi
    Now am I not eligible for ESI from past two years but still iam not used ESI amount for my family its totally wasted if there have any option to get back or redeem as cash, can you please give me a details

    • No, there is no possibility of ESI contribution to be redeemed as cash

  • My salary is Rs. 15000 and my allowance OT is 7000 then i get a gross salary of 22000, am i eligible for deduction under ESI.

    • Yes, you are eligible if your employer is not considering your OT amount for Gross Salary Computation.

  • E.g.: Consider that an employees’ gross earning is Rs. 20,000 in April. In June, that person gets an increment which leads her out of ESI coverage i.e, salary increases to Rs. 25,000.
    Than in above condition what can be done in maternity case if she needs to avail maternity benefit from aug-2020

    • It will be cover till the month of September as per rules.

      • Thank You for quick reply
        Means that she cannot avail 26 weeks maternity leave

        • general maternity policy under the company.
          ESIC policy will not apply.

  • In which month employer will exclude employee from Esi after increment. Please confirm

    • From the month of April or October, as applicable.

  • Good morning to all,

    I have a small doubt our employees got increment and some persons are getting 21000 above and which option should i select while preparing the return.

    • Employees who cross 21000 in between of half period will continue the contribution till the end of the half period. Once the half period is completed show the employee as out of coverage in the succeeding month.

  • Hi my salary is 19000/- and my co. opt me out of Esic ,Is there any damages or penalty Co. has to bear from ESIC for not registering me in ESIC?

    • Yes, the ESIC Commissioner can penalize the company.

  • An employee becomes ‘Out of coverage’ in Jan, 2020 so made contribution till March and tried marking Out of coverage in April by giving code 4 and last working day as 31-03-2020 but system not accepting. Please reply.

    • As the employee has resigned, the code to be selected is 2 and not 4.

  • This is my first time visit at here and i am really happy to read
    everthing at single place.

    • Thank you for reading and commenting. We are glad this blog was useful to you.

  • I feel that is among the so much significant info for me.
    And i’m happy studying your article. However wanna commentary on some
    normal issues, The website taste is perfect,
    the articles is really great : D. Just right job, cheers

    • Thank you for reading and commenting. We are glad this blog was useful to you.

  • Hi…
    In our company employees are working based on daily wage rate and their monthly basic salary is Rs.18070…
    Sometimes we are paying overtime to employees who are continuing to do work after working hours. Overtime amount can be 4000 or more.
    So my question is we have to deduct ESIC Contribution for that employee in that month…..becz overtime allowance can not be regularly payable. It may be differ and in that case not possible to mention last working day as from next month salary can be less than 21000.

    • Overtime is not considered for ESIC. Hence, you can consider only based on Basic Salary.

  • my employee salary is 22000 gross if i present 15 days so my salary 11000 gross he is liable to pay esic ?

    • NO, he is not liable to pay

  • Sir,
    shall we cover any insurance policy for beyond the ESIC employees,it is mandatory or not please confirm and if its comes under mandatory where its mentioned pl give clarification.

    • Insurance beyond ESIC is as per the company policy and it is not mandatory unless it is a manufacturing unit. For Manufacturing unit, there are workmen insurance which is a must.

  • my sallery was crossed 21000 in july 2018.but my company still deducting my ESI.Is that ok?

    • NO, the ESI deduction should have stopped from OCT 2018.

  • Hi
    How to delete the name of a worker from esic portal if worker salary is above 22000 from the first date of joining
    Worker is registered on the portal by mistake plz help

    • write a letter to the ESI IT officer to Delete wrong entries & also to adjust the Amount if uploaded wrongly

  • My salary is increased in may 2021 which is more than 21000 still my contribution is getting deducted under ESIC. So upto which month i can avail medical benefits for my family?

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