The current ESIC Wage limit is Rs 21000. In our numerous audits, we have observed Employers keeping certain borderline employees outside ESIC coverage of Rs 21k although their ESIC wages are well within 21k.

Here is a detailed explanation:

1) Under ESIC, there are two types of wages

    a. ESIC wages for considering coverage criteria
(i.e firstly to decide whether an employee will be covered or not)

    b. ESIC wages for considering contribution criteria
[i.e further to decide whether ESIC contributions will be paid on certain components of salary for an employee eligible under point 1(a)]

2) Under criteria mentioned at point 1(a),

a. all employees with actual monthly wages upto & including Rs 21000 will be considered for coverage under ESIC.

b. However certain components will be excluded like Incentive, Bonus, Statutory bonus, Overtime, Washing Allowance, Coveyance Allowance, Ex-gratia, gratuity, Leave encashment, fuel allowance, shoe allowance etc.

c. After deducting “b” from “a”, the ESIC Wages for coverage will be arrived & all employees upto & including Rs 21000 will be considered for ESIC coverage.

3) Under criteria mentioned at point 1(b), there is a further bifurcation subject to certain payouts of salary components:

a. Many components like Incentive, Statutory Bonus, Attendance Bonus, Ex-gratia, Commission if paid on less than 02 months frequency will only be considered for making ESIC contributions & not for ESIC coverage criteria.

b. If payments for components mentioned under point 3(a) are paid at more than 02 months frequency (i.e say every 3rd month, 4th month, sixth month or annually) there will be no ESIC contribution paid on these components.

c. Overtime, whenever paid to employee, will only be considered for ESIC contribution if the said employee is under ESIC coverage by virtue of point 2(a)

4) Some allowances like Washing Allowance, Shoe Allowance, Fuel allowance, Gratuity & Conveyance Allowance are permanently exempted from both ESIC coverage criteria & ESIC contribution criteria.

Hope this is helpful