ESI Retroactive Accounting Shweta Gupta/ Kirubakaran T Globalization Services

February 13, 2013

© 2013 SAP AG. All rights reserved. 2

Agenda

Introduction

Configurations

Computation Flow

Loss of Pay Scenario

Mid-month Joinee and Termination

ESI Retrospective Behaviour

Change in Salary of the Employee

Creation/Change in Other Statutory Deductions

Deletion of Other Statutory Deductions

Reporting

© 2013 SAP AG. All rights reserved. 3

Introduction

Employee State Insurance (ESI) is a component of compensation provided to an

employee earning wages below Rs.15,000 to provide for:

• Hospital facilities and out-patient facilities

• Medicines provided by the hospital

• Compensation in case of accident / death

A percentage of amount specified by a Central Act is deducted from the employees salary

and sent to the ESI Corporation along with Employer's contribution.

Current contribution rate for :

• Employee is 1.75% of Basic + Dearness Allowance + All other allowances + Overtime

• Employer is 4.75% of Basic + Dearness Allowance + All other allowances + Overtime

* Basis = Basic + Dearness Allowance + All other allowances

© 2013 SAP AG. All rights reserved. 4

1.75%

Introduction

© 2013 SAP AG. All rights reserved. 5

Contribution Period Benefit Period

April 1 - September 30 January 1 - June 30

October 1 - March 31 July 1 - December 31

ESI Contribution Period

• If employee is eligible for ESI in any one month of ESI contribution period, then

the employee continues to contribute for all subsequent months in that

contribution period

• ESI Number is required to be maintained (allotted by ESI) for all the employees

© 2013 SAP AG. All rights reserved. 6

Configurations

IT0588 • Maintain Subtype 0001 of IT0588 (Other Statutory Deductions)

ESILT

• ESI contribution applicable when basis less than or equal to limit maintained in ESILT in view V_T511P

ESIMN

• Only Employer contribution when basis is less than or equal to ESIMN in V_T511P

ESIPH

• ESI limit for Physically Challenged employees is maintained in ESIPH in view V_T511P

© 2013 SAP AG. All rights reserved. 7

Actual Basis Vs. Nominal Basis

Actual Basis

Basis

Eg: INR 20,000

Loss of Pay

Eg: 3 LOP

Actual Basis

Eg:INR

18,000

Nominal Basis

Basis

Eg: INR 20,000

Loss of Pay

Eg: 3 LOP

Nominal Basis

Eg: INR 20,000

© 2013 SAP AG. All rights reserved. 8

Computation flow with Loss of Pay

Employee is eligible for ESI contribution

Employee has certain days of Loss of Pay

Nominal basis is compared with ESI limit(INR:15,000)

Employee will contribute towards ESI

ESI Basis:

INR 12,000

Say, 15 days

of LOP

Actual Basis:

INR 6,000

Nominal Basis:

INR 12,000

© 2013 SAP AG. All rights reserved. 9

Computation flow for mid - month Joinee/Termination

Employee joined in mid of month

Salary exceeds the ESI limit (ESILT)

IT588(0001) maintained

Nominal Pay is compared with ESI limit

No ESI Contribution for the employee

Joined on

15th of

April

Say, INR

20,000 is the

Monthly salary

Maintained

from 15th April

Nominal Pay:

INR 20,000

However, Wagetypes will have

below values:

/112 (Actual Basis) = INR 10,000

/113 (Nominal Basis) = INR 10,000

Retrospective ESI

Change in Salary of the Employee

Creation/ Change in Other Statutory Deductions

Deletion of Other Statutory Deductions

© 2013 SAP AG. All rights reserved. 11

Retrospective change in salary of the employee

Salary is changed retrospectively

Difference b/w Actual ESI Basis (/3EA) from retrospective runs and previous payroll runs is taken into C/F wagetype (/AEA)

Amount from /AEA is cumulated into B/F wagetype (/ZEA) & brought into current period processing

© 2013 SAP AG. All rights reserved. 12

Retrospective increase in salary of the employee

Employee is contributing

towards ESI for April to

September block

• Basis = /3EA

Salary is increased

retrospectively from April

• Salary increment can be done from period within the same block / across blocks

Delta of Basis is brought forward

to the Current period

processing

• Delta Basis = /ZEA

ESI contribution would be done on

current month basis + B/F delta

basis

Basis = /3EA (New) +

/ZEA

© 2013 SAP AG. All rights reserved. 13

Retrospective decrease in salary of the employee

Employee is contributing

towards ESI for April to

September block

• Basis = /3EA

Salary is decreased

retrospectively from April

• Salary decrement can be done from period within the same block / across blocks

Delta of Basis is not brought

forward to the Current period

processing

• Delta Basis = /ZEA

ESI contribution would be done only on current

month basis

Basis = /3EA (New)

© 2013 SAP AG. All rights reserved. 14

Retrospective creation/change in Other Statutory

Deductions

Change is done

across blocks

Change is done in any

period within the same

block

Retrospective creation / change of

IT0588 (0001)

© 2013 SAP AG. All rights reserved. 15

Creation/Change within same Block

Employee has salary less than ESI limit

Payroll is executed for some periods

IT588(0001) maintained retrospectively

Basis of retro period is b/f to current period processing

ESI contribution would be done on current month + B/F basis

IT0588 is

not

maintained

Say, April &

May period

payroll is run

Maintained in

June eff. April

/AEA is formed

in April & May,

cumulated to

/ZEA in June

ESI basis = /3EA

(Current month

basis) + /ZEA

© 2013 SAP AG. All rights reserved. 16

Creation/Change across blocks

Employee has salary less than ESI limit

Payroll is executed for some periods

IT588(0001) maintained retrospectively

Basis of retro period is b/f to current period processing

ESI contribution would be done on current month + B/F basis

IT0588 is

not

maintained

Say, Till

October period

payroll is run

Maintained in

November eff.

April

/AEA is formed for all

retro periods i.e. for

April to October and

cumulated to /ZEA in

November

ESI basis = /3EA

(Current month

basis) + /ZEA

© 2013 SAP AG. All rights reserved. 17

Retrospective Deletion of Other Statutory Deductions

Deletion done

across blocks

Infotype deleted in any period within the

same block

Retrospective deletion of

IT0588 (0001)

© 2013 SAP AG. All rights reserved. 18

Deletion within same Block

IT588(0001) is maintained

• Employee is eligible for ESI contribution

Employee is contributing

towards ESI for April and May

• Basis = /3EA

IT0588(0001) is deleted

retrospectively

• Deletion is done in June (period within the same block) eff. April

System refunds ESI contribution

Contribution done for

April & May is

refunded

© 2013 SAP AG. All rights reserved. 19

Deletion across the Block

IT588(0001) is maintained

• Employee is eligible for ESI contribution

Employee is contributing towards ESI

• Contribution is done in April – September block & also for October & November period

IT0588(0001) is deleted

retrospectively

• Deletion is done in December (period across block) eff. April

System refunds ESI contribution

Contribution done for

October and November is

refunded

© 2013 SAP AG. All rights reserved. 20

BAdI to stop Refund

Implemented

Not Implemented

HR_IN_ESI_REFUND

Refund

No

Refund

© 2013 SAP AG. All rights reserved. 21

Reporting

HINCESI0

DEFINITION

Generates Form 5, Form 6 & ESI Monthly Report

Contribution Period & Output Format on selection screen

determines the output of the report

FEATURES

Form 5: ESI contr. details of employees for

a contr. period printed as Form

Form 6: ESI contr. Details for a contr.

Period are can be downloaded as

worksheet

ESI Monthly Report : Announced in the

year 2011 to file employee's monthly

details

© 2013 SAP AG. All rights reserved. 22

Queries

Thank you

Contact information:

Shweta Gupta & Kirubakaran T

Globalization Services

SAP Labs India,

Bangalore