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
| 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
- SAP Customizing Implementation Guide à Personnel Management à Payroll data à Basic Pay
In this step, the following are defined:
- a. Wage type - 1025 medical allowance
- b. Indirect Valuation method and percentage for Medical Allowance wage type
- 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.
- SAP Customizing Implementation Guide ->Payroll ->Payroll India ->Statutory Social Contribution ->Employees State Insurance ->Maintain ESI eligibility limit
In this step, the following are defined:
- a. Maintain ESI eligibility limit and number of working days in a month
- b. Indirect Valuation method and percentage for Medical Allowance wage type
- c. Assignment of ESI grouping to personnel sub areas
- 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.
- Automatic Payment of Medical Allowance based on the gross ESI Eligibility
- Employee CTC report / Salary comparison will not be effected due to changes in the ESI eligibility
- 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
- Help.sap.com