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 21,000 after including overtime and production incentives. As our factory classifies as a seasonal factory, his salary crossed 21,000 for around 8 months. Is that employee eligible for ESI or not? If there is no work in off seasons, his basic salary comes under 21,000 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
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Thanks in advance.
From India, Amritsar
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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 the 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 an incentive at 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. If the wages of an employee exceed Rs 21,000 due to overtime, for example, Rs 25,000 in a month, he will not be out of coverage. However, for contributing to ESI, his wages including overtime wages will be counted as part of wages, and contributions will be payable on a salary of Rs 25,000.
In your case, the employee will earn an incentive every month, for eight months in a year or during the 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 that continues in May and June, and his wages, including the incentives, exceed Rs 21,000, then he will be out of ESI coverage. But if, for any reason, the month of April is not a season and his salary is less than Rs 21,000, then he would come under ESI and would continue to be under ESI till the contribution period ends on 30th September, even if his salary exceeds Rs 21,000 in May. The same reasoning shall apply to one whose salary is within Rs 21,000 in October but becomes more than Rs 21,000 in November. In such a case, he will be under ESI till the end of March of the following year.
In the case of the treatment of overtime wages, the ESIC has made a law to ensure that frequent coverage and out-of-coverage situations do not take place. However, concerning incentives, the only available law is that it shall be part of wages if it is paid regularly and not part of wages if paid at an interval of more than two months.
From India, Kannur
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4761Regarding overtime, what the Act says is that it is a part of wages for contribution but not for coverage or non-coverage. If the wages of an employee exceed Rs 21,000 due to overtime, for example, Rs 25,000 in a month, he will not be out of coverage. However, for contributing to ESI, his wages including overtime wages will be counted as part of wages, and contributions will be payable on a salary of Rs 25,000.
In your case, the employee will earn an incentive every month, for eight months in a year or during the 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 that continues in May and June, and his wages, including the incentives, exceed Rs 21,000, then he will be out of ESI coverage. But if, for any reason, the month of April is not a season and his salary is less than Rs 21,000, then he would come under ESI and would continue to be under ESI till the contribution period ends on 30th September, even if his salary exceeds Rs 21,000 in May. The same reasoning shall apply to one whose salary is within Rs 21,000 in October but becomes more than Rs 21,000 in November. In such a case, he will be under ESI till the end of March of the following year.
In the case of the treatment of overtime wages, the ESIC has made a law to ensure that frequent coverage and out-of-coverage situations do not take place. However, concerning incentives, the only available law is that it shall be part of wages if it is paid regularly and not part of wages if paid at an interval of more than two months.
From India, Kannur
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