E.S.I. on Overtime
Whether E.S.I. contributions are payable on overtime?
There have been differences of opinion among various High Courts on this point. Finally, the Supreme Court has held that overtime wages will be liable for deductions for ESI contributions. The employer is obligated to pay wages when the employee works beyond his duty hours. This will be in addition to the payment of wages an employee receives for normal work. In other words, both the remuneration received during the working hours and overtime constitute composite wages, and thereby it is a 'wage' within the meaning of section 2(22) of the Act. Whatever remuneration is paid or payable for overtime work forms wages under an implied term of the contract of employment, and the remuneration paid therefore forms part of the 'wages' under section 2(22) of the Act. The Supreme Court considered this elaborately and held that the Act is welfare legislation and the definition of wages is designedly wide.
Indian Drugs & Pharmaceuticals Ltd. etc. vs. Employees' State Insurance Corporation, 1997 LLR 1 (Supreme Court).
Overtime is not considered a wage under the PF Act (PF wage = Basic + DA only).
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