We have an employee strength of around 200, as per the new Social Security Code 2020 incentives are not a part of wages. So we have an employee whose salary crosses 21000 after including overtime and production incentives. As our factory classifies as a seasonal factory, his salary crossed 21000 around for 8 months. Is that employee eligible for ESI or not? If there is no work in off seasons his badic and comes under 21000 in that month. Please help me in this situation because I do not want to deprive an employee of their rights.
Thanks in advance.
From India, Amritsar
Thanks in advance.
From India, Amritsar
You need not go into the definition of wages under new codes when the definition of wages as per ESI Act is still in force. As per ESI Act, if the incentive is paid regularly then that will be considered as part of wages. At the same time, if the employee is getting incentive in an interval of more than two months, it can be excluded from the scope of wages.
Regarding overtime, what the Act says is that it is a part of wages for contribution but not for coverage or non coverage. That is if wages of an employee exceeds Rs 21000 due to overtime, say, Rs 25000 in a month, he will not become out of coverage. At the same time, for contributing to ESI, his wages including Overtime wages will be counted as part of wages, or contribution will be payable on a salary of Rs 25000.
In your case, the employee will earn incentive every month, of course, for eight months in a year or during season. Naturally, if months like April and October are seasons his coverage will be decided based on the gross salary including incentives. For example, if April is a season which will be continued in May and June, and his wages including the incentives exceeds Rs 21000, then he will be out of ESI coverage. But if, by any reason, whether the month April is not a season and if his salary is less than Rs 21000, then he would come under ESI and would continue to be under ESI till the contribution period ends on 3oth September even if his salary exceeds Rs 21000 in May. The same reasoning shall apply to one whose salary is within Rs 21000 in October but becomes more than Rs 21000 in November. In such case he will be under ESI till March end of the year following.
In the case of treatment of overtime wages, the ESIC has made law so that frequent coverage and out of coverage shall not take place but in respect of incentives the only available law is it shall be part of wages if it is paid regularly and it is not part of wages if it is paid in an interval of more than two months.
From India, Kannur
4238Regarding overtime, what the Act says is that it is a part of wages for contribution but not for coverage or non coverage. That is if wages of an employee exceeds Rs 21000 due to overtime, say, Rs 25000 in a month, he will not become out of coverage. At the same time, for contributing to ESI, his wages including Overtime wages will be counted as part of wages, or contribution will be payable on a salary of Rs 25000.
In your case, the employee will earn incentive every month, of course, for eight months in a year or during season. Naturally, if months like April and October are seasons his coverage will be decided based on the gross salary including incentives. For example, if April is a season which will be continued in May and June, and his wages including the incentives exceeds Rs 21000, then he will be out of ESI coverage. But if, by any reason, whether the month April is not a season and if his salary is less than Rs 21000, then he would come under ESI and would continue to be under ESI till the contribution period ends on 3oth September even if his salary exceeds Rs 21000 in May. The same reasoning shall apply to one whose salary is within Rs 21000 in October but becomes more than Rs 21000 in November. In such case he will be under ESI till March end of the year following.
In the case of treatment of overtime wages, the ESIC has made law so that frequent coverage and out of coverage shall not take place but in respect of incentives the only available law is it shall be part of wages if it is paid regularly and it is not part of wages if it is paid in an interval of more than two months.
From India, Kannur
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