Is Overtime Allowance Added In Gross Salary? - CiteHR
Umakanthan53
Labour Law & Hr Consultant
Adoni Suguresh
Sr.executive (per & Adm)
Janardan_raccha
Sr. Hr Team Member
Raajz_johnny
Generalist
Saloni M
Human Resource
Pon1965
Construction
+2 Others

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Hey All
I am Saloni, I am handling Human Resource Department for my restaurant. I am very new in compliance and benefits. Our chef and service assistant will be working 12 hours (9 legal and 3 hours overtime) I have divided their salary accordingly. I am confused in one thing that I have added overtime allowance (double the normal per hour pay rate) in the total salary and its coming Rs.18000 per month, which means employees are exempted from ESIC.
My question is we have to add Overtime in gross salary or without overtime Gross salary will be calculated.
Please check the breakup:
Direct
Basic 7,199
HRA @ 50% 3599.64 (Non-Taxable, 50% as we are in Chennai)
Conveyance 800 (Non-Taxable)
Washing Allow 1000 (Non-Taxable)
Overtime Allowance 4799.52
Lunch Allowance 602

Total Gross 18000.44
Any expert insights will be of great help.

OT wages is part of the earnings and it should be included in payslip. If the person is in I.Tax net, his OT wages will be taxable income. Pon
Thank you so much sir.
Please can you clarify me that after adding overtime allowance as mentioned in my question, gross salary is coming as 18,000 and if I take overtime out its coming 13,000. SO, employee should be covered under ESIC or not?
Thank you
Saloni M.

You have to deduct ESI contribution from OT wages and remit it along with corresponding Employer's contribution .But OT wages shall not be reckoned as wages for excluding the Chef from ESI scheme.
Varghese Mathew
9961266966

Dear Saloni,
Please refer section 2 (22) of ESIC Act, wherein it is been clearly mentioned that for calculating rate of contribution overtime will be include on its wages but wherein finding applicability / eligibility overtime won’t be included on its wages. (Though overtime is never been considered as a fixed wages)
Now in your case employee is earning gross wages of Rs. 13200/- which is less than 15000/- which shows that ESIC is applicable and the rate of contribution will be deducted on its total Gross of Rs. 18000/- for the same.
Regards,
Janardan

Dear Saloni,
The payment of over time wages is nothing but the extra work done by the employee and paid at double the rate of wage as per statutory. His Over time wages to be shown in the pay sheet as other cash payment or over time wages which quill not attract any PF deduction , bonus and gratuity on over time wages. However, this OT wages will be considered for IT provisions.
Adoni Suguresh
Sr.Executive (Pers, Admin & Ind.Rels) Rtd
Labour Laws Consultant

Hey
Thank you all for the contribution.
I understood the concept and finally I have come up with the salary breakup.

CTC WORKINGS
Components PM
Direct
Basic 7,199
HRA @ 50% 3599.64
Conveyance 800
Washing Allow 785
Overtime Allowance 4799.52

Total 17,183

Benefits
ESIC@4.75% 816.2134


Total Gross 17999.653
Please let me know, if its fine.
Is there any senior member, who can provide me with their email id, so that I can double check my decisions.
Thank you so much.
Saloni M.

Dear Saloni,
Please find the details. Hope this will clarify your doubts
In Payslip the salary break is as follows

Earnings
Basic 7199
HRD 3599
Conv 800
Washing Allow 785
Gross Salary 12383
OT 4799.52
Gross Earnings 17182.52

Deductions
PF 863.88
ESI 216.7025

Ded 1080.5825

Net Salary 16101.9375

Pl.consider this, ESI will be on Gross Earnings, @ 1.75% from Employee.
In Payslip the salary break is as follows

Earnings
Basic 7199
HRA 3599
Conv 800
Washing Allow 785
Gross Salary 12383
OT 4799.52
Gross Earnings 17182.52

Deductions
PF 863.88
ESI 300.6941

Ded 1164.5741

Net Salary 16017.9459

Mr. Sugunbars how you can deduct the pf 863.88, it ll be 780 those b+da more den 6500 its max deduction you cant dedu that amount and employers ll be 886.

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