Purpose

This wiki explains the system behavior during Employee State Insurance (ESI) deduction for new hired employees  in the month of hiring. ESI is not being deducted for employees in the month of joining.

Overview

1. An employee is eligible for ESI only if,

(a) Other Statutory DeductionsInfotype (0588) Subtype ESI (0001) record exists for the employee.

(b) ESI Basis of the employee is less than or equal to the amount stored in the ESI Eligibility Limit Constant (ESILT) of the table view Payroll Constants (V_T511P). This amount is set by the government.  ESI Basis is the sum of basic salary, dearness allowance, all allowances and overtime. Overtime is excluded from ESI Basis for the calculation of ESI eligibility but is included for the computation of ESI contribution.

2.    If the average wage per day of the employee is less than or equal to the amount stored in the Min.Avg.Wage per day Constant (ESIMN) of the table view Payroll Constants (V_T511P), the system calculates only an employer ESI contribution of 4.75% of the ESI Basis. Average wage per day for an employee is ESI Basis Nominal Wage Type (/113) divided by the value in the No.of days in month for calc Constant (DYSMN) of table view Payroll Constants (V_T511K).

3.    If the employee is eligible for ESI in any one month of the ESI contribution period, then the employee is eligible for all the subsequent months in that contribution period.

But for new hired employees sometimes the ESI is not deducted in the month of joining even though they are in the esiable period and infotype 588 has been maintained.

Section 1

1. Hire an employee from  the middle of the month
2. Maintain the infotype 588 from hiring date
3. Run the payroll for the pernr
4. Check the ESI deduction wagetypes /3E1, /3E2

Section 2

The deduction for ESI takes place on actual pay but the eligibility is checked based on nominal pay.

ESI Nominal Basis is calculated as per the no. of days employee worked in the organization and then projected for the whole month.

For example, consider a test pernr  9330

The employee has been hired on 08.02.2012

Therefore, no. of working days in the month = 22

And for these 18 days his /113 = 11.557,84

Considering only the value of this /113, it would seem that ESI should be deducted for the pernr as it is less than 15,000 but actually the eligibility for ESI is checked based on nominal pay of the pernr and

not just the value of /113.

So the nominal salary for this person comes up as,

$nominal_pay = it-betrg * ( vdays / vksoll )

nominal_pay = 11.557,84 * (29/22  )

= 15,235.33

Now, Rs 15,235.33 is greater than 15000 that’s why ESI is not getting deducted for the pernr.

/113 is formed in the rule IN72 and it depends upon the processing class 72.

Related Content

Related Documents

http://help.sap.com/saphelp_470/helpdata/fr/5a/5b96b0556442b693164bf0c0b57cd5/content.htm

http://help.sap.com/saphelp_470/helpdata/fr/5a/5b96b0556442b693164bf0c0b57cd5/content.htm

Related Notes

Keywords

ESI new joinee, /3E1, /3E2 new joinee, ESI mid month joining, ESI not deducting gross less than 15000, ESI Not getting calculated during the month of joining