Should Extra Holiday Pay Push Technicians Over the ESI Ceiling Limit?

Dear All,

I am from a manufacturing industry, and we have technicians who are working under machines (Non-unionized). They are covered under ESI. We are paying an extra payment of Rs.1000/- for working on National/Festival holidays. However, during the October '18 salary, we paid them an extra Rs.1000/- for working on a National Holiday (for one day). After paying Rs.1000/-, five of them crossed the ESI ceiling of Rs.21000/-. Should the adhoc payment be considered for the ESI ceiling limit of Rs.21000/- or not?

No extra payment is for overtime, and ESIC is payable on overtime as well. However, it is not marked for exclusion. For exclusion, the basis is the average of the 6-month gross salary, excluding overtime.

Hi,

As already informed by the learned member, the ad hoc payment in your case does not disturb the ESIC applicability in any manner whatsoever. It was a payment done as overtime, which, as you know, is not a regular instance or occurrence and is thus excluded from the term 'wages' as per the ESI Act.

Thanks and Regards

Dear Sir, In both the months of October '18 and November '18, we have two holidays: October '18 (2nd Gandhi Jayanthi) and November '18 (1st November 2018), and we had paid for the same. However, as per the ESI Act, it states:

"Wages include any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal, or layoff and other additional remuneration, if any, paid at intervals not exceeding two months."

We have paid an extra Rs. 1000/- for overtime continuously for two months, which causes the employee to exceed the ESI ceiling limit. In the salary slip, it is mentioned as "Adhoc payment" and not Overtime. Would this be considered as wages?

Thank you.

Unfortunately, the meaning of ad hoc remains the same even if you keep paying the amount the whole year. It is not regular but created for a purpose, either for some time or a particular purpose. It is still temporary, no matter how many months you keep doing it. If you wish to make it permanent, there are other ways of doing it, such as adding it to the basic or some other slot which is treated as a wage. For now, you cannot stop paying contributions towards ESI for the employee whose overall income is above 21,000 but is not a permanent feature. Even overtime is not to be treated as wages as far as ESI is concerned, the reason being the same - not a regular payment.

Thanks and Regards