Skip to Content

ESI DEDUCTION AND MEDICAL ALLOWANCE PAYMENT PROCESS

AUTOMATED PROCESS FOR: DEDUCTION OF ESI WHEN GROSS INCOME IS < ESI GROSS ELIGIBILITY AND PAYMENT OF MEDICAL ALLOWANCE WHEN GROSS INCOME IS > ESI GROSS ELIGIBILITY




1. Purpose

This document is based on a customer specific requirement which was undertaken in a project. It describes the method and process to be followed for addressing the ESI / Medical allowance payment process.

Business Requirement

Employee is eligible either for ESI deductions or for medical allowance payment. If employee is eligible for ESI deduction then medical allowance should not be paid and vice versa. But, Medical allowance should be considered for other CTC calculations etc., even though ESI gets deducted for an employee

  • Automatic calculation and payment of medical allowance / deduction of ESI
  • Employer has fixed ESI circles and ESI is deducted as per statutory norms
  • Medical Allowance should not be paid to the employee when the gross is < ESI Gross eligibility
  • ESI should not be deducted when gross is > ESI Gross eligibility and the medical allowance should be paid.

2.  Abstract

This document explains the step by step procedure to configure medical Allowance payment / ESI deduction process

3.  Description


3.1 System Configuration settings

Below are the configurations / Rules to be written to address the scenario

  1. S.No

Description

Rule/Wagetype

Place Holder in Schema

1

Create a wage type Medical Allowance – part of Basic Pay infotype

1025

-

2

Configure ESI specific settings for India

-

-

3

Write a PCR (Personnel Calculation Rule) – in case ESI , move ESI value to a variable

ZMD7

INN1 – Gross to Net Calculations (YNN1). To be placed after INESI function.

4

Write a PCR (personnel Calculation Rule) – If Condition fulfillment for ESI variable

ZMD5

INN1 – Gross to Net Calculations (YNN1). To be placed after INESI function.

5

Write a PCR (personnel Calculation Rule) – if Gross < ESI Gross eligibility then Subtraction of medical amount from Gross wage type (/101)

ZMD6

INN1 – Gross to Net Calculations (YNN1). To be placed after INESI function.

6

Write a PCR (personnel Calculation Rule) – If Gross > ESI Gross eligibility then make medical allowance as zero

ZMED

INN1 – Gross to Net Calculations (YNN1). To be placed after INESI function.

7

Write a PCR (personnel Calculation Rule) – If gross > ESI Gross eligibility then move the actual medical amount to a variable

ZMD2

INN1 – Gross to Net Calculations (YNN1). To be placed after INESI function.

3.1.1 Create Medical Allowance wage type

  1. SAP Customizing Implementation Guide à Personnel Management à Payroll data à Basic Pay

In this step, the following are defined:

  1. a.   Wage type -  1025 medical allowance
  2. b.  Indirect Valuation method and percentage for Medical Allowance wage type
  3. c.   Assignment of wage type to payscale structure

Note: Basic Pay infotype configuration for country India should have the wage type 1025 (nnnn)– medical allowance


3.1.2    Configuration of ESI Specific settings for India

All standard configurations related to ESI – India has to be done.

  1. SAP Customizing Implementation Guide -> Payroll -> Payroll India -> Statutory Social Contribution -> Employees State Insurance -> Maintain ESI eligibility limit

In this step, the following are defined:

  1. a.     Maintain ESI eligibility limit and number of working days in a month
  2. b.    Indirect Valuation method and percentage for Medical Allowance wage type
  3. c.     Assignment of ESI grouping to personnel sub areas
  4. d.    Maintain the contribution rates for ESI

3.1.3 PCR to move ESI Value to a Variable – ZMD7

Place holder in YNN1 – Gross to Net calculation

3.1.4  PCR – if condition fulfillment for ESI – ZMD5

Place holder in YNN1 – Gross to net calculation

3.1.5    PCR to subtract medical allowance from gross wagetype (Gross < ESI Gross eligibility) – ZMD6

Place holder in YNN1 – Gross to Net calculations

3.1.6    PCR to make medical allowance as ‘zero’ – in case gross is <ESI Gross eligibility – ZMED

Place holder in schema YNN1 – Gross to net calculation

3.1.7    PCR to move medical allowance to variable and pay – ZMD2

Place holder in schema YNN1 – Gross to net calculation


4.  Results

The following are the results from this method.

  1. Automatic Payment of Medical Allowance based on the gross ESI Eligibility
  2. Employee CTC report / Salary comparison will not be effected due to changes in the ESI eligibility
  3. No changes to master data Inspite of change in ESI eligibility limit


5.Conclusions

Most of the IT / Manufacturing sectors in India has the car lease process. It’s a standard and automated solution which eases the work of Payroll Administrator in any company


6.  Source

Project experience

  1. Help.sap.com
Tags:
Former Member