Understanding ESI Deductions and Overtime Regulations in Salary Calculations

Hi all,

I have recently changed my job. In my previous company, we were not deducting ESI on overtime. But now, in my new company, we are deducting ESI on overtime as well. I want to know what the rule says. Is it mandatory to deduct ESI from overtime as well?

Regards,
Sanjeev

Hi Sanjeev,

What you were doing in your earlier company was wrong. ESI contributions need to be deducted on OT payments as well.

Thanks and regards,
Kameswarao

Yes, Sanjeev, overtime amount has to be deducted from the total salary, but only if it is mentioned in the payslip.

Sathasivam
HR Manager

Yes, ESI amount should be deducted from the overtime amount as well. If the gross salary is 13,500, then the OT amount is 2,500. So, the total ESI deduction for both employee and employer contributions should be deducted on Rs. 15,000 only. The revised ESI wage ceiling is Rs. 15,000 from 01.05.10 onwards.

Dear Sanjeev,

ESI amount should be deducted from the overtime amount as well. The reason for this is that ESI is deducted based on the total earnings of the individual. If the earnings, including overtime, exceed 15000 Rs, ESI is applicable. If the earnings, including overtime, are less than 15000 Rs, ESI is not applicable. If a person/worker's total earnings exceed 15000 Rs, they will fall under the company's sick leave scheme, where ESI rules will not apply.

For your queries - yes, overtime is taken into account. The total ESI deduction, both employee and employer contributions, should be based on Rs. 15,000/- only. The revised ESI wage ceiling is Rs. 15,000/- from 01.05.10 onwards.

Mahesh Dspm HR Officer Binani Zinc Ltd

Dear friends,

Just tell me about the overtime issue. If a person receives 15,000 + overtime, then they are not in the ESI scheme. However, if under certain conditions they do not work overtime and their gross is less than 15,000, what should be done?

@Devi1310 & @maheshdaspm: I have not come across any provision that says to deduct ESI only on Rs.15,000 if his gross salary, including OT, exceeds the limit of Rs.15,000.
I would be highly grateful if you could provide me details of such a law/notification.
Thanks & Regards,
Anil Kulkarni.

Hi,

As per the new ceiling, ESIC is for persons with a salary of <=15000. Hence, anyone who has ESIC in their CTC and is paid overtime (OT), ESIC will be charged on the OT amount. For those who are out of the ESIC bracket, their OT amount will not attract ESIC. It's as simple as this.

Regards,
Jeene

Hi,

Salaries are deducted for late entry to the office in our organization. So, if somebody's salary in a particular month becomes less than 15k, will they be covered under ESI?

Per me, the monthly fixed component plays a crucial role. Any addition or deduction does not have a role; hence, if the fixed component falls under the ESIC bracket, you must calculate the actual amount by the end of the month, regardless of any additions or deletions for various reasons.

KK

The wage ceiling limit is Rs. 15,000/- p.m. from 01-5-2010. It is Rs. 25,000/- p.m. for employees with a disability. Contribution is payable on overtime payment as well. Since overtime payment is not a regular payment, it is counted for payment of contributions to get more cash benefit but is not counted for the wage ceiling. For example, if an employee is getting Rs. 14,000/- p.m., and he gets Rs. 2,500/- p.m., the contribution is to be paid on Rs. 16,500/-. Still, he continues to be an employee. O.T. is not counted for the purpose of the wage ceiling.

There are two six-monthly contribution periods in a year: April to September and October to March. In the definition of 'Employee' under Section 2(9) of the ESI Act, the proviso reads as follows:

'Provided that an employee whose wages (Excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government, a month at any time after and not before the beginning of the contribution period, shall continue to be an employee until the end of that period'.

If the wages of an employee exceed the ceiling limit of 15,000/- a month excluding O.T. either in April or October, he ceased to be an employee from that month and no contribution needs to be paid. However, if his wages exceed the limit excluding O.T. in any other month, a contribution needs to be paid until the end of that contribution period, i.e., up to September or March as the case may be.

Ramana Murty, Hyderabad

As per the definition of wages under the provisions of ESI, overtime is also included, except for bonus and washing allowance, which are not considered as wages.

However, if a person's salary is less than 15000/- and they receive overtime such that the total amount exceeds 15000/-, ESI is deducted on the entire amount, not just up to 15000/-.

Regards,
KPR

Dear Mr. Sanjeev,

ESI is to be deducted on overtime as well, but the same should not be considered for the computation of the ceiling.

R. Eagambaram
DGM - P&A
M/s. Global Pharma

Dear Mr. Sanjeev,

ESI should be deducted on Overtime as well, but it should not be considered for the computation of the ceiling. You are aware that, as per the recent amendment in the ESI Act, the wage ceiling limit is Rs. 15,000/- per month from 01-5-2010. For employees with disabilities, it is Rs. 25,000/- per month. Contributions are payable on overtime payments too. Since overtime payment is not a regular occurrence, it is considered for contribution payments to receive more cash benefits but is not included in the wage ceiling.

R. Eagambaram DGM-P&A M/s. Global Pharma

Hello Sanjeev,

The O.T. amount will deduct ESI, definitely it's mandatory. If arrears have to be paid to workers or employees, they also have to deduct ESI.

Thanks,
Chander
HR - Exec.

Yes, ESI is applicable on overtime (OT) for employees covered under the provisions of the ESI Act, 1948. It is necessary to clarify that the monthly coverage limit for an employee is Rs. 15,000 (based on fixed monthly pay). Even if the earnings, including OT (which is not of a fixed nature), exceed this limit for a particular month, ESI contributions will be deducted on the total amount, inclusive of OT.

For example, if the monthly earnings are Rs. 14,500 and the OT is Rs. 2,650, then the ESI deduction of 1.75% of the employee's contribution will be calculated on Rs. 14,500 and Rs. 2,650, subject to rounding off to the next higher rupee in each case. Similarly, in the following month, if the monthly earnings are Rs. 14,500 and the OT is Rs. 3,250, the ESI deduction of 1.75% of the employee's contribution will be calculated on Rs. 14,500 and Rs. 3,250, also subject to rounding off to the next higher rupee in each case.

If salary emoluments are less than 15000, then ESI is applicable on OT. For example, if the salary is 14000 and the overtime is 2000, then ESI is applicable.

Regards,
Harshad Patel

[QUOTE=Devi1310;1147060]

Dear Sir/Madam,

According to my knowledge, if considering overtime (OT) exceeds Rs 15,000.00, we have to pay including the exceeding amount. In your case, you have to pay Rs 13,500.00 plus Rs 2,500.00, i.e., Rs 16,000.00, and ESi on Rs 16,000.00.

My salary is Rs 15,000.00. Since this is the month of May, if I work on May 1st (a government holiday), I will be entitled to one extra day payment and ESi is calculated on that extra day as well.

Dear Sanjiv,

Just imagine, who will take responsibility if an employee gets injured while working overtime? Will the ESIC organization cover the expenses if we do not have a practice of paying for overtime?

Hence, the answer is that we are liable to deduct and pay for overtime as well as ESIC.

Ravi Shankar S.

Dear Friend,

Please do not misguide. For exemption, the gross salary excluding overtime is considered. Hence, if an employee's salary inclusive of overtime is more than Rs.15,000, ESI has to be deducted.

For example:
- Salary Rs.14,400/- - ESIC applicable

Dear Sanjeev,

ESI amount should be deducted from the overtime amount as well. The reason for this is that ESI is deducted from the total earnings of the individual. If the earnings, including overtime, exceed Rs.15,000, ESI is applicable. If the earnings, including overtime, are less than Rs.15,000, ESI is not applicable.

If a person/worker's total earnings exceed Rs.15,000, they will be covered under the company's sick leave scheme where ESI rules will not apply. Regarding your questions - yes, overtime is taken into account.

The total ESI deduction, both employee and employer contributions, should be based on Rs.15,000 only. The revised ESI wage ceiling is Rs.15,000 from 01.05.10 onwards.

Mahesh Dspm
HR Officer
Binani Zinc Ltd

Dear Friend,

For exemption, the gross salary excluding overtime is considered. Hence, if an employee's salary, inclusive of overtime, is more than Rs. 15,000, ESI has to be deducted.

For example:
- Salary Rs. 14,400 - ESIC applicable
- Salary Rs. 15,100 inclusive of overtime - ESIC applicable
- Salary Rs. 15,001 - ESIC not applicable.

Hope this is clear to everyone now.

Regards,
Satishkumar

Hello,

ESI is mandatory for all companies working with more than 20 or 10 employees, with or without power. ESI is calculated on gross salary. If the gross salary is below 15000, ESI is applicable. Gross salary does not include overtime (OT). OT is paid later if an employee works overtime for more than 8 hours. Yes, OT is also included when calculating ESI, even if the gross salary exceeds 15000 due to OT.

Sanjeev

Anil sir,

There is no notification regarding ESIC up to 15k including OT. It depends on various companies only. I posted this query as per my company norms.

Dear all,

I would like to know if a staff employee can approach the Labor Office to receive their full and final settlement if they have been dismissed from service by the employer.

Thank you. Best regards, Dulari

Hi,

How can you say that so confidently? OT is a variable component in a salary structure.

Do you mean to say, for example, if someone is getting a gross salary less than ₹15,000, you will deduct ESI, and for the same person, if it exceeds ₹15,000, including overtime, you will not deduct ESI? And in the next month, if the gross salary, including overtime, falls below ₹15,000, will you deduct?

Please clarify.

Regards,
Priya

Dear Friends,

Yes, ESI contribution is to be paid on OT as well. One of my friends on this site has mentioned that he is deducting ESI only for Rs. 15,000 (inclusive of OT). Even if your gross salary is Rs. 14,999 + OT 7,000, you have to pay ESI on Rs. 21,999. OT amount should not be considered for the ESI Ceiling for coverage. Only the gross amount, excluding any Washing allowance and reimbursement of actual conveyance to commute between the workplace and residence, should be taken into account.

I hope this clears the doubts of my friend.

G.K. Manjunath
Manager-HR

Dear Mr. Ravi,

You have asked if any employee meets with an accident during the course of OT, who will take care of his treatment, etc. Immediately after the accident, the Management has to provide first aid. We have to send Form 12 (Accident report) to the Local Office and the dispensary. In the report, you have to fill up the reason for allotting OT (exigency of work). Kindly see column 18 of Form No. 12. In case the accident happened while meeting an emergency, please state. The injured employee will receive all the benefits as if a normal workman would. Are we not paying contributions on OT as well?

Hope this clarifies matters.

G.K. Manjunath Manager-HR

Hi,

ESI should be deducted on total salary earnings (that includes OT earnings also). However, the ESI scheme will be applicable to those employees whose fixed salary is below Rs. 15,000 per month, excluding OT amount.

For example:
1. If the total salary of a person is Rs. 14,000 and his OT amount is Rs. 2,500, then his total earnings will become Rs. 16,500. He will come under the ESI scheme, and we have to deduct ESI on the whole Rs. 16,500, not just up to Rs. 15,000.

2. If the total salary of a person is Rs. 16,000 excluding all his OT amounts, and if the person takes some days off in that particular month, resulting in his salary being below Rs. 15,000, then we should not deduct ESI from his salary because he will not fall under the ESI scheme.

Dear friends, I have shared my opinion. Is there anything wrong with this? Kindly revert to me.

Regards,
Asha

Dear All,

ESIC should be deducted for all allowances exclusive of Uniform/Washing Allowances, so you have to deduct for all allowances.

Thanks & Regards,

B. Ravi Murugan
M.A., LLB., PGDLA
Labour Law Professional

Dear All,

ESIC deduction is mandatory for those who are receiving a salary/wages up to Rs 15,000/- per month. If any employee is receiving any type of incentive and overtime related to production, for example, (salary Rs 15,000 + OT Rs 2,000 + prod. inc. Rs 2,500 = total Rs 19,500), then the ESIC should be calculated on Rs 19,500 (both contributions included).

If an employee is receiving a Gross of Rs 15,010 per month, there is no ESIC applicable on any head.

D. N. Sharma - GGN

Yes, O.T. will attract ESI but should not be taken into account for determining the ESI coverage.

With regards,

The comments given by Mr. K.V. Ramanamurthy from Hyderabad will help junior HR People. The comments are to be inserted into T R Venkataraman.

ESI has to be deducted from the total earnings, which is less than 15,000 or equal to 15,000, of the employee shown in the payslip. This deduction applies regardless of any overtime payment, which will not be included in the monthly salary.

I hope this provides you with a clear picture.

Dear all,

Kindly clarify the following scenario: if a worker's gross salary is Rs. 15000, and he falls under the ESI act, but in any given month he earns Rs. 2000 as overtime, increasing his gross salary to Rs. 17000, crossing the ceiling limit. My question is whether ESI will be deducted for this particular worker in that month.

Subhas
9824577325

Dear All,

ESIC should be deducted if Gross salary is below 15000.

Thanks & Regards,

Rajesh Mishra
Law Officer

For more information, visit: https://www.citehr.com/255681-esi-ma...#ixzz1Wa0ViWAq