Are Overtime Wages Included in ESI and PF Calculations? Seeking Clarification

Please clarify whether we have taken overtime wages for calculating ESI and PF or not.

Thanks & regards,
Hekarthi

Overtime Wages and ESI/EPF Contribution

Overtime wages are considered as wages for contribution towards ESI but are not considered for exclusion from ESI coverage. Additionally, overtime has no relevance for EPF.

Regards,
Varghese Mathew

It's very simple.

ESIC Calculation

For ESIC, it is calculated on the Gross salary (which includes OT). The OT amount is included for calculating ESIC, and if the salary (Gross) is above Rs. 15,000/-, ESIC is not applicable.

PF Calculation

For PF, it is calculated only on Basic + DA. The OT amount is not included for calculating PF.

Regards,
B. Anand Kumar

Mr. Anand's conclusion is good, but the PF deduction also depends on Basic + DA. If it is below the ceiling limit, then the PF also attracts the contribution.

Mr. Varghese Mathew, please permit me to elaborate on your statement:

Wages and ESI Calculation

Wages = Rs. 14,000/- + OT = Rs. 2,000/-

For checking whether the employee is within the ESI purview, consider only wages, which are Rs. 14,000/-. (As this is below the ESI ceiling, he will be under the purview of ESI coverage.)

But while calculating contributions in respect of the employee, you have to remit ESI contributions for Rs. 16,000/- (Wages + OT).

For PF, he has already responded.

Regards,
M.V. Kannan

Yes, if his wages are Rs. 14K, then he shall be coverable under the Act, and the contribution shall be calculated on wages plus overtime. However, I think it should be subject to Rs. 15K, not on 16K.

For the calculation of ESIC, Gross Salary means Basic, DA, Conveyance, HRA, Special Allowance, and all fixed components. Apart from the fixed components, if any variable pay is provided like Overtime or Incentive, even this has to be calculated for ESIC. Similarly, if any Leave encashment and One-time Bonus are paid to resigned employees and if ESIC applicability is there, this should not be taken into consideration.

When it comes to PF, Total Wages represent only Basic + DA. Nowhere should PF impact Overtime wages.

Thanks,
Srinivasan
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