Understanding Overtime Regulations, ESI Contributions, and PF Exemptions for Employees

Dear friends,

Kindly advise me as to whether overtime attracts PF and ESI.

Regards,
Maj. Subhash Sharma

I don't think OT attracts PF or ESI. As per my knowledge, PF and ESI are decided based on Basic Pay.

With Regards,

Phanindra Sai A

Mr. Subash Sharma,

No question about OT attracts P.F. O.T will not attract P.F. O.T attracts E.S.I. only, but doesn't calculate for the eligibility criteria, i.e., 10,000. We cannot add O.T to Gross salary to conclude for the Eligibility criteria.

Hope it clears your ambiguity.

Regards,
S.V

Dear Friends,

PF is cut on the basic salary, but ESIC is deducted from the gross salary. Therefore, in my opinion, overtime can attract ESIC.

Regards,
Reshma Sawant

Dear Mr. Subhash,

Good afternoon!!!

OT doesn't attract PF as PF is always calculated on Basic Salary, not on Gross salary. OT always affects gross salary, not basic salary. OT can attract ESI if even after adding OT, one's salary is below or equal to INR 10,000 gross.

Dear Sharma,

Of course, OT attracts ESI, not PF. Not only does OT attract ESI, but everything else does as well. Whatever you pay on a monthly basis, even as an allowance.

Sanjay Gupta, Noida

Dear Team,

As per the ESIC Act, it is stated that ESI is calculated on Basic and all allowances. Overtime (OT) is also considered to be an earned allowance, attracting ESI. Even though the ESIC ceiling is set at 10,000 as Gross earnings, OT is accounted for separately. Only bonuses and ex-gratia payments made to workers will not attract ESIC.

Thank you.

Hello, Mr. O.T. will not attract P.F. O.T. attracts E.S.I. only. But who is eligible for this criteria, i.e., 10,000? We paid the total deduction after ESIC and calculated O.T. double required for the Factory Act.

Hope it clears your ambiguity.

Regards,
C.P.V.

ESI contribution is payable on OT but not for EPF. Any payment made not on a monthly basis, such as incentives, performance bonuses, if made, say once in two months or more, ESI is not payable. Certain expenses reimbursed, such as shoe allowance, washing allowance, defray, encashment of leave, bonus/ex-gratia payments, also do not come under the definition of "wages" under the ESI Act.

HC Subbaramu HR Consultant, Bangalore

Dear Subhash,

OT does not attract PF as PF is calculated on Basic + DA. Yes, it does attract ESIC. When an employee does overtime work, it amounts to the acceptance of the same, hence, an implied contract emerges between the employer and the employee. Both the remuneration received during the working hours and overtime constitute a composite wage, and thereby, it is a wage within the meaning of Sec. 2(22) of the ESI Act. Therefore, the contribution is payable on the overtime allowance. However, overtime allowances will be considered as wages for the purpose of charging the contribution only and will not be considered for the purpose of the coverage of the employee under the Scheme.

Hope this clears your doubt.

Regards, Manasi Shah HR/Labour Law Consultant Advent Corporate Services Mumbai

Please be very clear that Employee State Insurance (ESI) will be deducted from overtime (OT) payments. OT amounts do not attract Provident Fund (PF) deductions.

'OT' is a wage under the definition in ESI. Hence, ESI contributions are payable. If total earnings exceed 10,000/- including OT, then the contribution will be restricted to 10,000/- only. OT is not considered for PF.

HC. Subbaramu

HR & Labour Law Consultant