Understanding Overtime: Is It Part of Gross Salary and Affects ESI Deductions?

Hi all,

Can anybody tell me what overtime is? Is it part of the gross salary? Also, is ESI deducted on overtime?

Dear,

If someone works more than 9 hours a day or 48 hours in a week, that extra work done by the individual is called overtime, and it is to be compensated with double rates of wages. You have to deduct ESI on it, and OT is not part of the gross salary.

Thanks,
J. S. Malik

Dear,

OT means working more than the designated duty hours. We shall pay for the overtime at double rates for those extra hours. We have to deduct ESI on OT; however, OT is not considered part of the gross salary. Instead, it will be counted as a contribution and the ESI daily rate will be calculated accordingly.

Regards,
Kalijanni

Thank you for your answer. I know the meaning of overtime, and we are paying double for that. However, I want to know how we can deduct ESI on OT for a worker whose salary is $3073, and his OT is 40 hours. What would be his ESI deduction on $3073 at 1.75% and for OT at 40*2*?????

ESI will be deducted from the total salary, including the OT amount. There may be months during which the salary of an employee may exceed Rs 10,000 (the limit for ESI). Still, in that month, the contribution payable by the employee at 1.75% of the increased amount shall be deducted. Similarly, the employer has to contribute at 4.75% of the total wages, including the OT amount.

However, for deciding the eligibility of an employee under the ESI, the OT will not be counted. Therefore, one whose salary, including OT, becomes more than Rs 10,000, is not exempted from ESI.

In your case, the salary is Rs 3,073. OT amount is calculated as 2 times the hourly rate, i.e., 3,073/30/8 x 40 = Rs 1,024. Total salary = Rs 3,073 + Rs 1,024 = Rs 4,097.

ESI - Employee's share = Rs 71.70
ESI - Employer's share = Rs 194.60

Regards,
Madhu.T.K

Dear Mr. Madhu,

Thank you for sharing such an elaborate explanation of ESI and OT. While I was familiar with the concept, your practical implementation has enhanced my understanding.

Thanks again.

Regards,
Dhanashree

I am totally confused. If the salary of an employee is, say, 6000 per month, and he has done overtime of 2 hours per day (every day) during the month, how will the calculations be done?

Dear Madhu, can you please explain: In your case, the salary is Rs. 3073. The overtime amount is 2 times the hourly rate, i.e., 3073 / 30 / 8 x 40 = 1024. What do 8 and 40 represent?

Total salary = 3073 + 1024 = Rs. 4097. ESI - Employee's share = 71.70. ESI Employer's share = 194.6. What do 1.75 and 4.75% represent?

I guess you should read the complete communication. It says that total overtime is of 40 hours. Now if your monthly salary is Rs 3073, then to calculate the per hour rate of salary, you will have to compute 3073/30 = 1 day's salary. Let's say this figure is Rs X. Then X/8 (assuming that it is an 8-hour day, as is normally the case) will give you the salary paid per hour. Let's say this amount is Rs Y. So Y * 40 * 2 = the total amount to be paid for overtime.

According to the ESI Act, any person who is drawing wages below Rs 10,000 per month (this revised limit was made effective around 2 years ago) is covered under the ESI Scheme. In this scheme, the employee contributes 1.75% of his salary towards the ESI Fund, and the employer contributes 4.75% of the salary. Refer to Section 2 (clause 9), Chapter IV - section 39 of the Employee State Insurance Act, 1948.

I hope your doubts are clarified now.

Regards,
Dhanashree

Dear All,

Can anyone tell me what are all the various components of salary for which ESI has to be paid? Also, let me know the various allowances like Conveyance, O.T, Incentives, and so on for which ESI has to be paid or not.

My second question is, X's salary is 15000; therefore, he is not covered under ESI. A sum of 5000 is paid to him as an incentive. Do we have to pay ESI for X? If so, on what amount ESI has to be paid?

Regards,
Dinesh R.
9941491766

Dear Dinesh,

If the incentive is given for more than a quarterly period, then this is not part of the gross salary (i.e., not a part of ESI wages). If it is paid for a period less than a quarter, i.e., monthly/bimonthly, then this amount should be considered as ESI wages.

In case of any queries, please feel free to call Prashant at 9850401160 (Pune, Maharashtra).

Regards,
Prashant

AMENDMENT IN PROFESSION TAX SLABS

Maharashtra Govt has amended the Profession Tax Act wef 1.7.2009 and changed Profession Tax slabs as follows:

Monthly gross salary does not exceed Rs. 5000/-, Profession Tax Rs. Nil.

Monthly gross salary exceeds Rs. 5001 but does not exceed Rs. 10000/-, Profession Tax Rs. 175/- per month.

Monthly gross salary exceeds Rs. 10000/-, Profession Tax Rs. 200/- per month and in February Rs. 300/- per month.

: AMENDMENT IN PROFESSION TAX SLABS:

Maharashtra Govt has amended the Profession Tax Act wef 1.7.2009 and changed Profession Tax slabs as follows:

Monthly gross salary does not exceed Rs. 5000/-, Profession Tax is Nil.

Monthly gross salary exceeds Rs. 5001 but does not exceed Rs. 10000/-, Profession Tax is Rs. 175/- per month.

Monthly gross salary exceeds Rs. 10000/-, Profession Tax is Rs. 200/- per month, and in February, it is Rs. 300/- per month.