ESI Deductions Dilemma: How Does Overtime Affect Contributions on Salaries?

Dear Connections,

I want to know if an employee is receiving Rs. 20,000 as gross salary and is registered with ESIC. If his/her gross salary includes the overtime amount and exceeds Rs. 23,000, in this case, what will be the ESI deductions—on the gross salary of Rs. 20,000 or the gross salary of Rs. 23,000?

Thank you.

It should be on total wages, including the overtime, i.e., Rs. 23,000 in your case, that ESI should be deducted. Overtime wages are not considered for deciding whether an employee is under ESI coverage or not. However, for the deduction of contributions, the overtime wages will be considered as part of wages.