Are These Unfair HR Practices? Seeking Advice on Overtime and ESI Contributions

Seeking Advice on Unfair HR Practices

It's always good to have your doubts cleared by a wise person. Here I am—I am working as an HR Officer in a Manufacturing Unit in HP. There are many unfair HR practices carried out in the organization that I would like to discuss with you and have your valuable advice and expertise. Sharing the right thing can make a difference in someone's life, I believe. So please share your opinion.

Overtime Practices

1st Point: Referring to Overtime as Ex Gratia

Just saying or referring to "Overtime" as "Ex gratia"—can the employer overcome not paying the ESI contribution share to ESIC? On another side, in the legal register of Overtime under the act, they are mentioning "No Overtime is paid in the month of..." On the other hand, if an employee works more than the prescribed hours under the act and is even paid by the company, the company is booking it in the account as income of the employee.

2nd Point: Compensation for Overtime

During the peak of production, employees are made to work more than 100 hours in a month, and half of this overtime is compensated with leave, known as comp-off. This comp-off has to be consumed by the respective employee within two months, and even CL, SL, PL will also be affected due to this order, which is passed verbally by the Head HR. Please share what is the right thing to do.

My views

Remuneration received during working hours and overtime constitutes a composite wage and thereby it is a wage within the meaning of Sec. 2(22) of the ESI Act. Therefore, the contribution is payable on the overtime allowance. However, overtime allowances will be considered as wages for the purpose of charging the contribution only.

The actions are in violation of laws regulating overtime and leave and can be questioned by the Labour Officer and other regulatory agencies. The Head HR ought to know the rules and advise management accordingly, but he appears to be complicit with management. The Head HR is knowingly violating rules and will bear the consequences when regulatory authorities conduct checks.

Has any worker objected? Are there any trade unions in the factory? Take the risk of advising your higher-ups on the rule position and try to convince them to follow the rules. Saving in ESIC contribution will not be significant by showing it as ex gratia.

Someday it will be questioned, and then people will face trouble. Strike a careful path and avoid getting into a situation where the blame for following unfair HR practices does not fall on you.

First of all, I would like to appreciate your opinion and say "Thank you" for such a prompt reply.

Worker Objections

Has any worker objected? Yes, most of them always share the problems they face. At the same moment, they are afraid to come out in the open.

Trade Unions in the Factory

Are there any trade unions in the factory? No, there is no union here.

I will take your advice and, as a professional, I take the risk of advising our higher-ups on the rule position and try to convince them to follow the rules.

Seeking Your View

And what's your view on the second point? Please share...

Head HR is issuing illegal orders regarding overtime, such as mandating leave or days off. Overtime hours are regulated by this amendment. Please refer to the following link for more information: [Factories (Amendment) Bill, 2016](http://www.prsindia.org/uploads/media/Factories/Factories%20(A)%20bill,%202016.pdf). The maximum overtime allowed in a quarter is 125 hours. Therefore, it is advisable to thoroughly read all relevant rules, take notes, reference the original act, and then confidently address these violations with both the management and your Head HR. Keep in mind that your management may react negatively to this information.

Concerns About Overtime Practices

I prefer leaving out the first point as it was already rightly answered by my learned friends in an elaborate manner.

Skepticism About Compensatory Off for Overtime

Regarding the second point relating to the treatment of half of the overtime work hours as compensatory off within a period of two months, I am very skeptical about this procedure because of the following reasons:

1) The language of Section 59 of the Factories Act, 1948 clearly indicates that it is the statutory right of the worker to claim extra wages at the enhanced rate of ordinary wages when required to work beyond the normal working hours.

2) Dividing the entire overtime hours worked into two halves and paying extra wages (the rate is not mentioned but it must be single wages) for half of such hours in the name of "ex-gratia" to evade ESI contributions and asking the workers to avail of compensatory off is certainly illegal.