Threshold Limit for Coverage and Contribution
Rs 21,000 is the threshold limit for coverage and not for contribution. The gross salary does not include overtime wages, but it will be considered for contribution. Therefore, if a covered employee has a gross salary of Rs 18,000, the employee would be a covered employee. The total earnings, including overtime allowance, will qualify for contribution. Thus, you have to deduct the contribution on Rs 30,000 and contribute a contribution on the same Rs 30,000. You can exclude only traveling/conveyance allowance. If you have provided a uniform, obviously, the washing allowance can also be excluded from the contribution.
Benefits Payable to Employees
For the benefits payable to the employees, their total salary, including overtime wages, will be considered. As such, the cash benefits that the employee receives will also be higher. Another reason for considering overtime wages for contribution is that an employee meeting with an accident during the extended time (overtime period) will get insurance coverage.
Caution on Overtime
Caution: An employee is not expected to do overtime beyond a certain number of hours, and there are limits for overtime. It depends on state rules in this regard, and it should be around 75 hours in a quarter (of four months). Asking employees to do overtime over and above this is illegal.