Is My Employer Wrongly Deducting ESI from My Night Shift Allowances? Seeking Advice on Next Steps

I am an employee of a company consistently receiving a monthly salary above 24,000 for the past 20 months. My basic and HRA amount to 20,049, with the remaining salary designated as night shift allowances. My employer deducts an ESI amount of 473. When I approach my employer regarding this deduction, he mentions that the night shift allowances are solely used for ESI contribution calculation. Upon my research, I found that these allowances should also be considered as part of my salary, warranting exclusion from ESI. Kindly correct me if I am mistaken.

Furthermore, could you please advise me on how to initiate a case against my employer if they are deducting incorrectly? I seek your assistance as I believe ESI should not be deducted from my salary.

Thank you in advance.

Response to Your ESI Deduction Query

I have responded to your questions in two parts:

1. If the night shift allowance is part of your regular business, it should be added to compute the salary for the purpose of ESI.

2. If your employer has been deducting ESI contributions from your salary for 20 months, was there a reason for not asking upfront when they started doing it? Now, you can only ask your employer to refund the amount they have deducted from your salary but not force them. The money would have been deposited by them with the department to provide you and your family insurance and medical cover during this period, regardless of whether you used it or not. You can always ask them to stop doing it in the future.

Understanding Night Shift Allowance and ESIC Deductions

Night shift allowance is paid when an employee is deputed for night work. If the regular duty is prescribed as a night shift, then the employee can request to merge it as a special allowance. However, if the employee also works during the daytime for some period, then the night shift allowance is not paid.

If the daytime wages are below 21,000/- gross, then ESIC becomes applicable and is deducted even on the night shift allowance. Nevertheless, the employee can discuss the issue with the employer to abolish the night shift allowance and allocate it as a special allowance. This way, wages could be restructured, and the employee may exit from ESIC from April.

Regards