Is ESIC applicable on OT and relieving charges? OT and Relieving charges included in gross salary. Is he right?

Dear Senior Members,

Due to the very basic services of my current security agency, we are going to hire a new security agency for Indore (MP). However, in their quotation, they mentioned OT and relieving charges included in the gross salary. Is this correct?

Please give an answer to my below-mentioned query: Is ESIC applicable on OT and relieving charges?

ESI and Overtime Wages

ESI is applicable to overtime wages. If the rate is per hour, the question of overtime wages will not arise. They are supposed to engage three guards every day, with each one of them working for 8 hours. If any of them extends his duty beyond 8 hours, then it is the responsibility of the agency to give overtime wages and pay whatever ESI is applicable to that overtime. It is true that ESI is payable on overtime wages. But why should the principal employer bear it is a question.

Principal Employer's Responsibility

Now, if the principal employer only has stated that two security personnel should be deployed and each one shall engage for 12 hours, then it is another call, and certainly, the employer should bear the overtime charges with ESI contribution payable thereon. Again, it is another question of law that can an employee work for more than 75 hours as overtime in a quarter of 4 months? No, the employer cannot allow an employee to work for more than 75 hours as overtime over a period of four months. If you allow a security personnel to work four hours every day, obviously, he would cross that limit.

Relieving Charges

Relieving charges are wages payable to a reliever for the off day on which the security personnel is having his legally permitted weekly off, holiday, or leave with wages. If you give a contract to an agency, give them a contract for 24 hours' guarding. The rate should be per hour. In such a scenario, you are not concerned with a holiday or off day but you are only concerned with round-the-clock security on 7 days per week or 30/31 days a month. It is their responsibility to ensure that nobody works without any off. When you pay for 30/31 days a month, the relieving charges are inclusive.

Hiring a new security agency and understanding the terms mentioned in their quotation, such as overtime (OT) and relieving charges included in the gross salary, requires careful consideration, especially within the legal and regulatory framework of India. The employment laws and standards in India, including the Shops and Establishments Act (applicable at the state level, in your case Madhya Pradesh), the Minimum Wages Act, and the Contract Labour (Regulation and Abolition) Act, govern such arrangements.

Understanding OT and Relieving Charges:

Overtime (OT): Generally refers to the additional pay employees are entitled to when they work beyond their standard working hours. In India, the Payment of Wages Act and the Factories Act stipulate conditions under which overtime is to be paid, typically at twice the normal wage rate.

Relieving Charges: This could refer to the costs associated with providing replacement personnel when the regular guards are on leave or off-duty. This term isn't standard, so it's important to get clarity from the agency on what exactly it includes.

Legal Compliance:

Ensure that the security agency's proposal is in compliance with applicable labor laws, including the Payment of Wages Act, Minimum Wages Act, and any relevant state-specific laws. Verify that the agency adheres to the statutory norms for working hours, overtime, and leave entitlements, including weekly offs, national holidays, Casual Leave (CL), and Sick Leave (SL).

Contractual Terms:

Your contract with the security agency should clearly outline the terms of employment for the guards, including their working hours, shifts, leave entitlements, and the calculation of overtime and relieving charges. It should also specify the responsibilities and liabilities of the security agency, especially regarding compliance with labor laws and the provision of trained personnel.

Shift Arrangements:

For three 8-hour shifts covering 24 hours, ensuring that each guard gets the mandated weekly offs and leaves, the agency might need to employ more than just three guards to cover for absences and leaves. The inclusion of OT and relieving charges in the gross salary should be evaluated to ensure it does not result in any violation of minimum wage standards or lead to underpayment for overtime work.

Due Diligence:

Conduct due diligence on the security agency to ensure they have a good track record of compliance with labor laws and ethical practices. Consider seeking legal advice or consulting with an HR professional to review the contract terms and ensure they are fair, transparent, and compliant with all legal requirements.

Negotiation:

If certain terms in the quotation seem unclear or not favorable, consider negotiating these terms with the security agency. It's important that both parties are clear about expectations, obligations, and compliance with legal standards.

Documentation:

Ensure all agreed terms are well-documented in the contract to avoid future disputes. This includes detailed clauses about working hours, OT calculation, leave entitlements, and relieving charges.