Employee State Insurance (ESI) Functionality

1. Overview of ESI Functionality

StaffingGo enables automated management of Employee State Insurance (ESI) deductions, compliance reporting, and statutory tracking based on:

✔ Employee statutory eligibility
✔ Location-based applicability
✔ Salary structure and header-level configurations
✔ Leave scenarios (e.g., Maternity Leave)
✔ ESI deduction lifecycle adherence

The system follows statutory ESI rules with flexibility to override certain settings as per organizational needs.

2. Statutory Master Setup – ESI Not Applicable Locations

Navigate to:
Compliance → Statutory Master → ESI Not Applicable Locations

• Locations listed here are officially exempt from ESI deduction requirements.

• Employees mapped to these locations will have Consider to deduct ESI marked as No, ensuring statutory alignment.

• You can verify the latest official list of ESI-exempt locations using the below government circular:

  Govt. Circular - ESI Not Applicable Locations (PDF)

Scenario Example:

• Recently, employees were mapped to such exempt locations, so ESI deductions were skipped during payroll processing in compliance with statutory rules.

3. Employee-Level ESI Applicability

In:
Employee → HR Details → Statutory Information

Key Field: Consider to deduct Employee State Insurance (ESI)

• Yes: ESI will be deducted as per applicable rules.

• No: ESI deductions are excluded for that employee.

Important: If an employee is mapped to an ESI-exempt location, this field is auto-updated to No.

4. Salary Structure – Header-Level ESI Applicability

Navigate to:
Payroll → Salary Structure → Header Setup

Applicability Options:

• Salary headers like Basic, HRA, Special Allowance can be marked as Applicable for ESI.

• Headers like Leave Encashment, Ex-gratia, Local Conveyance, or Travel Allowance can be excluded from ESI calculations by default.

Override Flexibility:

• At the contract level, you can override these defaults based on specific requirements.

Recent Clarification Example:

• For a few employees, ESI was not calculating correctly because Local Conveyance and Travel Allowance headers were not marked as applicable for ESI.
  
  
  

5. Special Case – ESI During Maternity Leave

For employees under ESIC, during Maternity Leave:

✔ Apply 26 weeks (182 days) of Maternity Leave in the system.
✔ Compliance registers reflect the leave period accurately.
✔ Payroll Impact:

• Pay Period: 0

• Loss of Pay (LOP): Full calendar month

• Payable Amount: 0

• Statutory Deductions (PT, PF, ESI): 0

Ensures statutory compliance with maternity benefit and ESI rules while maintaining system accuracy.

6. ESI Cycle Logic and Mid-Year Salary Revisions

ESI Deduction Lifecycle:

• Once an employee starts ESI deduction, it continues for the entire ESI contribution cycle (April to September) & (October to March), even if gross salary exceeds ₹21,000 mid-cycle.

Override Scenario:

• For employees whose gross salary crossed ₹21,000 mid-cycle, ESI deductions continued as per statutory rules.

• On client request, ESI applicability was manually removed for 8 employees to align with specific payroll requirements, processed accordingly.

7. Common Practical Observations

✔ For some employees, ESI was not deducted because they were assigned to ESI-exempt locations—confirmed as per the official circular.
✔ Gross salary of mentioned employees is below ₹21,000, so ESI deduction applies as expected.
✔ All gross salary headers are applicable for ESI unless manually overridden.
✔ If certain headers should not contribute to ESI calculation, override settings at the contract level.

8. Recommended Actions for HR/Payroll Teams

✔ Review statutory settings regularly, especially location mapping and header applicability.
✔ For salary revisions mid-ESI cycle, assess impact and apply overrides cautiously.
✔ Use contract-level overrides only with proper validation to avoid compliance mismatches.
✔ Keep header applicability aligned with client requirements (e.g., excluding Local Conveyance/Travel Allowance from ESI if needed).

9. Conclusion

StaffingGo's ESI module ensures:
✅ Automated, rule-based deductions
✅ Location-based compliance controls
✅ Flexible salary header configurations
✅ Lifecycle tracking for ESI eligibility
✅ Full audit trail through statutory and pay registers

10. Additional Reference Links

✔ ESI Exempt Location List: Gov. Circular PDF

✔ StaffingGo Support Contact: Reach out for any clarifications or to schedule system demonstrations for ESI configuration.