How to Handle Employee Resistance to Increased ESIC Deductions Due to Recorded Overtime?

Dear Colleagues, I have encountered a problem regarding ESIC contributions. Please go through the following and suggest.

Issue with ESIC Contributions

Previously at our factory, overtime (OT) was paid in cash and did not show in the register. Now, we are paying OT along with wages directly into individuals' bank accounts. Previously, as OT was not recorded in the register, statutory deductions were calculated based only on wages, resulting in a lower ESI deduction than the current scenario.

The current issue is that the workers are reluctant to pay the additional amount. I would like to highlight that many employees receive wages exceeding Rs. 15,000 per month, including overtime.

Thank you.

Overtime and ESI Contributions

Overtime (OT) amount is a part of wages as defined under the ESI Act, 1948, and the rules/regulations framed thereunder. However, on the basis of the amounts of OT, the employee cannot be exempted even though their total wages, after including the amount of OT, exceed Rs. 15,000 (present coverage limit) per month (Rule 50 of ESI (Central) Rules, 1952). Even if the amount of OT was paid in cash at any time, it is no basis for non-compliance. When any verification of records is done by the ESIC officials (SSO), they can point out the default at the employer's level and claim contributions on such omitted wages.

Sir,

I wish to express my heartfelt thanks to you. I understand all that you have written. However, in the factory, I have struggled to make the workers understand these concepts. Due to the unsatisfactory service of the enrolled doctors and the lack of easily accessible hospitals, nobody is willing to pay for ESI.

In this scenario, as an HR Manager, when I attempt to find a win-win situation, the only option seems to be structuring the overtime (OT) payment in a way that exempts it from ESIC coverage. Please help.

I think washing allowances are not covered under ESIC. Please correct me if I am wrong.

Amol
AM- HR & Admin

Your company can devise a health insurance policy with a reliable health insurance company that offers better facilities than ESI. Simultaneously, apply to ESI authorities to exempt your company from the application of ESI provisions. Upon receiving such exemption, implement the health insurance policy. This is allowed under the ESI Act.

A.S. Bhat