Overtime Wages and EPF Deduction
Overtime wages will not qualify for EPF deduction. However, for ESI, the overtime wage will be considered as part of wages. ESI is contributed on gross salary. If you have supplied a uniform to the employees, then the washing allowance can be excluded from it. Similarly, the conveyance allowance shall also be excluded from the ESI qualifying wages.
ESI Coverage and Salary Limit
For coverage of ESI, the salary limit (excluding conveyance allowance and washing allowance) is Rs 21,000. Once an employee is covered, their wages, including the overtime wages, shall be considered for the deduction of contribution even if it exceeds Rs 21,000. This means that if an employee's salary is Rs 18,000 and he is a covered employee who does overtime, and his salary for a particular month becomes Rs 22,000, then Rs 22,000 should be considered for the contribution of ESI.
Contribution Periods
An employee whose salary exceeds Rs 21,000 during any month in the contribution period should be given coverage until that contribution period ends. There are two contribution periods, i.e., April to September and October to March. If an employee's salary becomes Rs 22,000 in the month of May, then he should contribute to ESI until September.