ESI Eligibility Confusion: Does Overtime Affect My Benefits When Salary Exceeds Rs. 15,000?

As all of us know, the maximum ceiling for claiming ESI benefit is Rs. 15,000/- per month salary. You stated that this Rs. 15,000/- includes all components of the salary - Basic, DA, Conveyance, HRA, OT, etc.

Now, assume an employee receives Rs. 15,000/- per month or less in salaries for a few months (say Jan to March in a year). However, his OT increases due to extra hours, and he gets more than Rs. 15,000/- per month in some or one month (say Rs. 16,000/- per month in April & May in a year). Will he be eligible for ESI benefit at that time when his salary has increased beyond Rs. 15,000/- in April & May? Subsequently, in June and July, his salary became Rs. 14,500/- per month due to reduced OT.

How does this process work? I did not get clarity from the ESI Act 1948 book or bare act. Please help.

I think you require two things to be clarified. First, if the salary of an employee increases and becomes more than the coverable limit (Rs 15,000, as it is at present), then he will continue to be covered until the contribution period ends. As you know, we have two contribution periods, namely, April to September and October to March. Therefore, if a salary increase takes place in May, he will remain under ESI coverage until September.

The second thing to note is that Overtime Wages are not considered for determining the coverage of an employee, but the amount of overtime will attract ESI contribution. Therefore, exceeding the salary due to overtime wages will not have any implications regarding coverage. For the purpose of coverage, the actual salary as per the agreement is taken into account. However, if an employee covered by ESI earns a higher salary during the month due to OT wages, he must contribute ESI for the entire amount, including overtime.

Regards,
Madhu.T.K