Comprehensive Insights on ESIC Calculation, Employee Coverage, and Overtime Wages Determination

Hi,

Can anyone please explain to me about the ESIC calculation? Whether it will be calculated based on Gross or on CTC? In my company, most employees work for overtime. For example, an employee's CTC is 10000. If they worked overtime for that month and received an additional 7000 as overtime pay, the total gross becomes 17000. My question is whether this employee is eligible for ESIC or not?

Please help me and provide a response to this.

Dear Ms. Suneetha,

In your case, you are not eligible for ESI because he is getting 17,000 PM. As per the ESI Act of 1948, those earning 15,000 PM are eligible for ESI.

Contribution for ESI:
- Employee Contribution: 1.75%.
- Employer Contribution: 4.75%.

Example:
If a person is earning 10,000 PM, in this scenario, the employee's contribution on Gross Earnings would be 10,000 * 1.75%. Employer contribution on Gross Earnings would be 10,000 * 4.75%.

I hope this information clarifies the ESI eligibility and contributions. If you have any further questions, please feel free to ask.

Thank you.

For the purpose of deciding coverage of an employee for ESI, overtime wages will not be taken into account. That means if an employee's wages are Rs 10,000 and he receives Rs 7,000 as overtime wages, he will still be covered by ESI since overtime wages will not be considered for deciding coverage. However, for the calculation of contribution payable, the overtime wages should be taken into account. This means his contribution will be based on Rs 17,000 and not on Rs 10,000 or even Rs 15,000. The salary ceiling for coverage is Rs 15,000, and a person earning more than Rs 15,000, excluding overtime, will be out of coverage.

Regards,
Madhu.T.K

It is necessary for the establishment to take workers' compensation (WC) policy in respect of employees not covered by Employees' State Insurance (ESI). The insurance cover will depend upon the age of the employee. If you contact any life insurer, you will get the details.

Regards,

Madhu.T.K

Dear Madhu T.K.,

Greetings for the day.

For coverage of an employee under the ESIC scheme, the overtime wages should necessarily be considered. Only those allowances should not be taken into account for those who are reimbursed, i.e., traveling allowances.

Thanks & Regards,

Sumit Kumar Saxena
9899669071

Dear Suneetha,

The person is getting a salary of 10,000/- per month, but he does overtime and earns an extra 7,000/-. The ESIC will deduct on 17,000/- because he is also covered by ESIC when he does overtime. In the next month, he may receive 10,000 + 3,000 (overtime), then the ESIC will deduct on 13,000/-. When an ESIC inspector audits your firm, he will review all your ledgers and accounts. If he finds overtime accounts and if you do not deduct the ESIC contribution on those wages, he will collect a 6.50% contribution from your firm. So, I advise you to please deduct the ESI on overtime wages.

Thanks,
Pawan Bhatia
09812585353

Dear Friends,

I do agree with Mr. Madhu's view. If an employee draws below Rs. 14,999/- gross wages, he is covered under ESIC. If he earns an additional Rs. 7,000/- as OT, even for that, you have to pay ESI contribution. Only Washing allowance is excluded from ESI contribution.

G.K. Manjunath
Manager-HR

Dear Sunitha,

As per ESIC Act Regulation 14, there is a declaration - every person employed as an employee within the meaning of Section 2(9) of the Employees' State Insurance Act, 1948 on ................................ in this factory or establishment and in respect of a remuneration not exceeding Rs. 15,000/- (excluding remuneration for overtime work).

There is no further clarification required for OT as it is excluded for ESI.

Regards,
Tejal Shah

Dear Friends,

Good evening,

I need information about Professional Tax. Which states are not deducting, and which states are deducting? Kindly provide information.

Madhu
HR Executive.

Dear Sumit Kumar Saxena,

Please go through what I have written in full. For "coverage," overtime wages will not be considered, but for "contribution," it should be considered.

Madhu.T.K

Dear Suneetha,

As Mr. Madhu mentioned, overtime salary will not be considered for coverage decision but will be factored in for the calculation of ESI deduction. If a person's gross salary is less than Rs. 15,000, then he is eligible for coverage under ESI, and deductions should be made on his earnings, including his overtime and other earnings (except washing allowances).

Regards,

Amaravathy Srinivasan

Dear All,

Mr. Madhu has clearly explained the scope of ESIC coverage. As rightly pointed out by him, OT is not considered for the purpose of deciding the wages for ESI coverage. However, while paying contributions, the total wages (wages + OT) must be considered for the payment of contributions.

The logic explained by ESIC officials is that OT is not a permanent part of the wage structure and can vary from month to month. In a given month, if the employee exceeds the ESI limit while considering his OT as wages for coverage, the subsequent month his wages can fall below the ESI limit, and he will come under the purview of ESI cover. This provision is given to enable the employee to enjoy uniform ESI benefits. Moreover, by paying the ESI contribution on the maximum wages (Wages + OT), the employee benefits as this will be considered for arriving at the daily wage of the employee. Hence, it is deemed as a double benefit for the employee.

M.V. KANNAN

Dear Mr. Madhu T. K.,

Is it applicable for shops and establishments as well? And what if the establishment is not a manufacturing unit, meaning a service unit? I am in agreement with your answer, and I have the same understanding, but when I confirmed with reliable resources, it was refused. Can you please provide me with any notification regarding the same or any reference for the same?

Regards,
Hardik

Dear Friends,

As per the Factory Act of 1948, the company has to pay ESI based on the net amount received by the employee. During the audit, they will match the ESI with the employee's net salary only.

Dear Suneetha,

In this case, I do agree with Mr. Pawan. The person is getting a salary of 10000/- per month, which means it is his CTC at which he was appointed. According to the ESIC Act, anyone who is getting a gross salary less than 15000/- will be covered under ESI. Now, he does overtime and earns an extra 7000/-, but he is still eligible for deduction because what if he does not do overtime next month and gets a salary according to 10000/-. The person is covered under ESIC until his CTC exceeds 15000/-.

Thanks,
Amit
Asst. Manager HR

ESI rules are the same for factories and establishments. The only difference is with regard to the coverage of the organization. For the coverage of a factory, only 10 employees are required, whereas for the coverage of a commercial establishment other than a factory, at least 20 persons are required. The ESI has instructed the state government to make it applicable to all 'establishments' employing 10 employees, thereby making it common for both factories and establishments.

Dear Amit,

CTC is a concept recently developed and it has no legal validity. Therefore, don't consider CTC for any calculations related to ESI, PF, or other statutory matters.

Regards,
Madhu.T.K

Dear Suneetha,
The ESIC Act clearly states that the ceiling amount for deducting ESI from employees is INR 15,000 per month. For those employees earning within this limit, ESI deductions are necessary. If employees receive overtime (OT) pay, ESI should be deducted separately on the OT amount. The OT amount does not affect the salary determination for an employee. The decision on ESI coverage can be based on the salary amount alone. It is advisable not to focus solely on OT.
Lakshmikanth.M
HR Dept

Dear All,

As Mr. Madhu has pointed out, employees are covered under ESI up to Rs. 15,000/-, and only if they earn more than Rs. 15,000/-, say Rs. 15,001/-, then they are outside the purview of ESI coverage.

Regards,
M.V. KANNAN

Dear Mr. Ponraji,

If you are providing uniforms to your employees and paying a reasonable amount for washing allowance, that is exempt from paying ESI contribution. In our concern, we have been paying Rs. 240 per month, and on that, we have not been paying ESI.

This is for your information.

G.K. Manjunath, Manager-HR

Dear All,

Now EPF is also available online, similar to ESI. Could you please confirm if this information is correct? Kindly provide details about this.

Thank you.

Hi,
ESI act covers all employees, whose remuneration does not exceed Rs 15000 pm (monthly remuneration means – monthly rated or regular/slandered components (not includes onetime payment like Bonus & Overtime).
The overtime allowances & Bonus will be considered as wage 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.
Aforesaid regular salary is 10000 pm (Basic + HRA + Conv + SplAll.. etc) that is less than 15000 so ESI will applicable and ESI will be deducted on total (Monthly Salary+ Over time amounts ) Gross Salary.
Also note that ESI will not be deducted on if any payment made at intervals exceeding 2 months.
Thanks,
Brijesh Kumar Vishwakarma

Hi,

The ESI Act covers all employees whose remuneration does not exceed Rs 15,000 per month. Monthly remuneration means monthly rated or regular/standard components, excluding one-time payments like bonus and overtime. Overtime allowances and bonuses will be considered as wages for the purpose of charging the contribution only and will not be included for determining employee coverage under the scheme.

The aforementioned regular salary is Rs 10,000 per month (Basic + HRA + Conv + SplAll, etc.), which is less than Rs 15,000. Therefore, ESI will be applicable, and ESI deductions will be based on the total gross salary (monthly salary + overtime amounts).

Additionally, please note that ESI deductions will not apply if any payments are made at intervals exceeding 2 months.

Hi,

The Employees' State Insurance (ESI) Act covers all employees whose remuneration does not exceed Rs 15,000 per month. Monthly remuneration includes monthly rated or regular/standard components but does not include one-time payments like bonus and overtime.

Overtime allowances and bonus will be considered as wages for the purpose of charging the contribution only and will not be considered for determining the coverage of the employee under the scheme.

The aforementioned regular salary is Rs 10,000 per month (basic salary + house rent allowance + conveyance allowance + special allowances, etc.), which is less than Rs 15,000. Hence, ESI will be applicable, and ESI deductions will be calculated on the total gross salary (monthly salary + overtime amounts).

Additionally, ESI will not be deducted if any payment is made at intervals exceeding 2 months.

Thank you,
Brijesh Kumar Vishwakarma

Dear All Seniors,

Good evening,

I need information about Payroll Executive interview questions, roles, and responsibilities.

Regards,
Madhusudhan