Are Overtime, Travel Allowance, and Attendance Bonuses Covered Under PF and ESI?

I'm not sure if the attendance bonus, overtime, and travel allowance that we pay to our factory workers will be covered under PF & ESI. At the moment, only the salary that we pay to our workers is being covered under ESI and PF. For the overtime, travel allowance, and attendance bonus that we pay them separately from their salary, we are not deducting PF and ESI.

Please advise if this is correct. Looking forward to your valuable feedback.

Thanks,
RK

For the purpose of ESI, wages include overtime wages and attendance bonuses if paid as per settlement or at intervals of two months but exclude traveling allowance.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Thank you for your valuable feedback. I understand from your reply that overtime (OT) and attendance bonuses should also be included while deducting the 1.75% from the employee side, but not travel allowance. Should any of these three be added while deducting the PF 12% from the employee side? Please help.

Thanks,
Rk

As per the Factories Act, 1948, Section 59(2), PF is also to be deducted on overtime paid to employees as this is considered a part of their salary. This ruling has been clarified by a recent judgment of the Madras High Court.

Thank you, Harpreet ji. I understand that PF is to be deducted on OT. Is PF also required to be deducted from the attendance bonus and travel allowance? Please advise.

Thanks,

No, it is not applicable to bonuses or any travel allowance paid extra. This deduction should only apply to the basic salary or overtime paid. The percentage for the basic salary should be calculated based on the basic salary for PF calculation on overtime.

Example Calculation

For example, if my salary is 10,000, out of which 6,000 is my basic salary, which is 60%. If I have done overtime for which I would be paid Rs. 500, you should calculate the basic part of 60% on the Rs. 500, which is Rs. 300. From this Rs. 300, you need to deduct PF at 12%, which amounts to Rs. 36.

PF and ESI Deductions

The PF deduction will be calculated on Basic + DA. If you are paid a quarterly attendance allowance, the payment is not covered under ESI.

Regards,
P. Xavier Raj

Overtime and Provident Fund Calculation

On overtime, we should not calculate the Provident Fund. Only ESIC will be deducted.

Regards,
M.B. Swaroop

Please tell me if we are paying the bonus, leave encashment, and local conveyance on a monthly basis along with the salary in the register, should ESI be deducted on these components or not.

Regards,
Praveen Kumar
HR Executive
Faridabad