Dear All,
We often
get questions about which part of wages/salary will get attract under Employees
State Insurance (ESI) contribution, hence, to support this please find below
information for same which is taken from ESI’s https://www.esic.nic.in/wages
website. Please note that sole right of
below mentioned information is with ESI Authority only, I am just reproducing
same for information purpose only.
---------------
Washing Allowance:
It is a sum paid to defray special expenses
entailed by the nature of employment and as such this amount does not amount to
wages.
(In lieu of old instructions issued vide Memo No.Ins.III/2/1/65 dt. 8.2.1967)
Suspension Allowancce/Subsistence Allowance
During the
suspension period the employee is not allowed to actually work and he is not
given full remuneration but the permissible subsistence allowance is paid to
the employee by way of remuneration for remaining attached to the services of
the employer as per the relevant service regulations governing his contract of
service, therefore, the subsistence allowance is part of wage as defined under
Sec.2(22) of the ESI Act and consequently on the amount of subsistence
allowance paid to the suspended employee, contribution is payable.
Supreme Court has also held in
the case of RD, ESIC Vs.M/s.Popular Automobiles etc.in its judgement dt.
29.9.97 in Civil appeal no.3850 of 1993 that suspension/subsistence allowance
is wage and contribution is payable under Sec.2(22) on the said amount.
(In lieu of earlier instructions were issued
vide Memo No.3(2)-1/67 dt. 3.6.67 & letter No.Ins.III(2)-2/71 dt.
10.8.1971)
Overtime Allowance
In the case of the employer as
and when the employer finds the need to have work done expeditiously, in
addition to the normal work during the course of the working hours, the
employer offers to the employee to do the overtime work after the working
hours. When employee does overtime work it amounts to the acceptance for the
same, hence there emerges concluded implied contract between the employer and
the employee. Both the remuneration received during the working hours and
overtime constitutes a composite wage and thereby it is a wage within the meaning
of Sec.2(22) of the ESI Act. Therefore, the contribution is payable on the
overtime allowance. However, overtime allowances will be considered as wage for
the purpose of charging the contribution only and will not be considered for
the purpose of the coverage of the employee under the Scheme.
The same view was held by the Supreme Court in
its judgement delivered on 6.11.96 in the case of Indian Drugs &
Pharmaceuticals Ltd. Vs. ESIC, in Civil Appeal No.2777 of 1980.
(Old instructions issued vide memo No.3-1(2)/3(1)/68
dt. 31.5.68).
Annual Bonus
Bonus paid to the employees
could not be treated as wage for the purpose of charging of contribution under
Sec.2(22), provided the periodicity of the payment is more than 2 months. The
said issue was also considered in the meeting of the ESI Corporation held on
19.12.1968 and the Corporation agreed to the recommendations of the Standing
Committee that bonus may not be treated as wage.Hence no contribution is
payable on annual Bonus.
(Earlier instructions were issued vide memo
No.Ins.III/2(2)-2/67 dt. 8.2.1967).
Incentive Bonus
As per the decision of the
Supreme Court delivered on 8.3.2000 in the case of M/s.Whirlpool India Ltd. Vs.
ESIC in civil appeal No.1903 of 2000, additional remuneration to become wages
has to be paid at intervals not exceeding two months as distinguished from
being payable. Thus, there has to be actual payment and the payment of
production incentive does not fall either under the 1st part or last part of
the definition of the term wages as defined in Sec.2(22) of the Act, hence no
contribution is payable on the incentive bonus, provided the periodicity of
payment is more than 2 months.
(Earlier instructions were issued by this office
vide Memo No.T-11/13/53/19-84-Ins.IV dt. 19.9.84, Memo No.Ins.III-2(2)/2/69
dt,. 26.12.73, Memo No.T-11/13/54/18/82-Ins.IV dt. 14.7.82 & Memo
No.D/Ins.5(5)/68 dt. 18.9.88.)
Production Bonus
Production Bonus like
incentive bonus is paid to the workers as additional remuneration and hence
like incentive bonus such additional remuneration in order to become wages has
to be paid at intervals not exceeding 2 months as distinguished from being
payable. Thus, there has to be actual payment and hence no contribution is
payable, provided periodicity of the payment is more than 2 months.
(Earlier instructions issued vide letter dated
4(2)/13/74-Ins.IV dated 2.9.85)
Inam/Ex-Gratia Payment
Inam represents a payment made
by the employer to any employee as a reward for the services rendered by him
for which he is/was not under obligation to render the same under the contract
of service which is expressed or implied but does not include the payment which
have been made to an employee in fulfillment of contract of service. This may
include exgratia payment.
Where Inam is being paid for special skill or
higher responsibilities/additional duties, it may be taken as remuneration and
contribution is payable.
Where the employer has introduced the scheme of
Inam but according to terms and conditions the employer has no right to withdraw
it or revise it, the same may be treated as wages and contribution is payable.
Where the employer has introduced the scheme of
Inam and he has right to revise or withdraw it at his discretion, the payment
of Inam under such scheme may not be treated as wages and contribution is not
payable provided the payment is made at an interval exceeding two months..
Where there is no scheme of Inam in writing but
still employer might be making payment under the head Inam on the basis of some
understanding between the parties, in such cases, the nature of payment and its
periodicity may be ascertained and whether payment of Inam is an exgratia
payment which is not covered by the contract of service. In case the
periodicity is more than 2 months, no contribution may be charged.
(Last instructions were issued vide letter
No.D-Ins.5(5)/68 dated 21.2.1975).
Wages Paid During Layoff
During the period of layoff
though the employee is not given actual work and is also not given full
remuneration but certain wages are paid to the employee by way of remuneration
for remaining attached to the factory/establishment of the employer, therefore,
such payments paid for the period of layoff are also wages for the purpose of
Sec.2(22) of the ESI Act and hence contribution is payable on such payments.
(Earlier instructions were issued in 1968).
Annual Commission
Sales Commission would fall
within the 3rd category of wages as defined underthe Act as additional
remuneration and there has to be actual payment as the word used is paid and
not payable, at intervals not exceeding two months. The question as to why the
period of 2 months is fixed was debated in Supreme court in the case of
Handloom House, Ernakulam Vs. RD,ESIC in Civil Appeal No.2521 of 1999 when it
was held that no employer shall have the permission to draw the payment of
contribution on the premise that annual payments have to be work out. Normally,
the wage period is one month, but the Parliament would have thought that such
"wage period" may be extended a little more but no employer shall
make it longer than two months. This could be the reason for fixing a period of
two months as the maximum period for counting the additional remuneration has
to make it part of 'wage' under the Act. Therefore, the annual commission is
excluded from the definition of the wages and hence no contribution is payable
on the annual commission.
( Earlier instructions were issued vide
Hqrs.letter No. Ins.III(2)-2/71 dated 10.8.71).
House Rent Allowance
House Rent Allowance is wage
in cases where it is being paid. Notional amount of house rent can not be
presumed as wages for deciding the coverage. In cases where an employee is
being paid house rent allowance, the same will be included both for coverage
and contribution. In cases where the staff quarters have been allotted the
amount of salary and wages paid will count for coverage and contribution and no
notional house rent allowance is to be presumed in such cases.
In the cases of Braithawait & Co. Vs. ESIC
and M/s.Harihar Polyfibres Vs. ESIC, Bangalore, Supreme Court has also held
that house rent allowance is a wage under Sec.2(22) of the ESI Act.
(Earlier instructions were issued vide memo
No.T-11/13/11/15-Ins.III dt. 28.9.75, No.Ins.III(2)/15/15/74-Ins.Desk.I dated
Dec.,76, No.T-11/13/53/19-84/Ins.IV dt. 19.9.84 & No.D.Ins.II/11/3087/303
dated 1.3.1985).
Night Sift/Heat/Gas & Dust Allowance
It is an additional
remuneration paid to the employee for performing duty atnight time during the
hours of darkness. This amount is paid by way of incentive under the scheme of
settlement entered into between the Management and its workmen and hence are
wages within the meaning of Sec.2(22) of the ESI Act. This view was observed by
the Full Bench of Karnataka High Court in the case of NGEF Ltd. Vs. Dy.Regional
Director, ESIC, Bangalore. Supreme Court in the case of M/s.Harihar Polyfibers
Vs. RD ESIC, Bangalore has also held the same view. Hence, Night Shift
Allowance, Heat, Gas & Dust allowance are wages under Sec.2(22) of the ESI
Act and contribution is payable on the said amount paid by the employer to the
employees.
(Earlier instructions were issued vide Memo
No.T-11/13/53/19/84-Ins.IV dated 19.9.94).
Conveyance Allowance
Fixed conveyance allowance
flowing out of a wage settlement or as per terms and conditions of employment
should be treated as wages under section 2(22) for all purposes except:
1.
Amount towards conveyance paid or reimbursed to any
employee for incurring expenses for specific duty related journey
2.
Reimbursement of actual cost of conveyance for
coming to work and going from work on production of ticket or season ticket and
subject to proof of actual expenditure
3.
Payment of certain amount for maintenance of
vehicle depending upon cadre of the official and category of vehicle and
subject to production of records for actually maintaining the vehicles
4.
Fixed allowance paid at an interval exceeding 2
months, unless such payment is made as per contract or agreement.
Service Charges
Service charges are collected
by management of the hotel on behalf of their employees in lieu of direct tips
and the same is paid to their employees at a later date.
Such amount collected as service charges will
not constitute wages under Sec.2(22) of the ESI Act. In the case of ESIC Vs.
M/s.Rambagh Palace Hotel, Jaipur, the High Court of Jaipur has held that
service charges are not wages under Section 2(22) of the ESI Act. This verdict
of the High Court of Jaipur was accepted in the ESIC and hence no contribution
is payable on service charges.
(Earlier instructions were issued vide letter
No.P-12/11/4/79-Ins.Desk.I dt. 18.9.79)
Medical Allowance
The employees working in
factories/establishments are being provided medical services in kind by the
employer but in certain factories/establishments instead of providing medical
services in kind, the amount spent by the employees on medical care is
reimbursed while in some other organisations, employees are being paid monthly
cash allowance in lieu of medical aid/reimbursement of medical expenses. Where
such payments are made by the employer in lieu of the medical benefit, the same
are to be treated as wages under Sec.2(22) of the ESI Act and the contribution
is chargeable.
(Earlier instruction were issued vide letter
No.Ins.5(5)/68-Ins.III dt. 21.8.71 & Ins.III/2(2)2/68 dated 24.6.71)
Newspaper Allowance
In certain
factories/establishments the employees are reimbursed the cost of Newspapers
while in some other factories/establishments the employees are paid monthly
newspapers allowance instead of reimbursement of the cost of the Newspapers.
Where the amount is being paid regularly to the employees by the employer as
Newspapers allowance the same will be treated as wages under Sec.2(22) of the
ESI Act and the contribution is chargeable. However, where the cost of
Newspapers is reimbursed to the employees, no contribution is to be charged on
such payments.
Education Allowance
Employees are being paid
monthly Education allowance for the children studying in the Schools/Colleges.
Where such education allowance is being paid monthly, the same is to be
considered as wages under Sec.2(22) of the ESI Act and the contribution is
chargeable on the said amount.
However, in such cases where instead of paying
the education allowance on monthly basis, the amount spent as fee is reimbursed
to the employees and booked under education allowance, in such cases no
contribution is payable.
Drivers Allowance
In some of the
factories/establishments the officers employed as employees are being paid
drivers’ allowance per month. This allowance is being paid to enable the
officers to appoint a driver at their own level and such drivers employed are
not being paid salary directly by the factories/establishments. Where such
allowance is being paid to the employees and the drivers are not engaged by the
employees, in such event the allowance paid as such will be considered as wage
under Section 2(22) of the ESI Act and contribution will be chargeable provided
the employee is coverable under the Scheme.
However, where the services of the drivers are
being utilised, in such event the drivers so engaged will be covered as
employee and contribution will be payable on the amount paid to the drivers as
salary and booked in the ledgers of the employer under the heading "Drivers’
Allowance".
Food/Milk/Tiffin/Lunch Allowance
Each case of payment of Food,
Milk, Tiffin and Lunch Allowance has to be examined on its merits depending on
the following conditions under which the allowance is payable:-
·
Tiffin/Food/Milk/Lunch Allowance paid in cash at a
fixed rate irrespective of whether the person is absent or on authorised leave
etc. may be treated as wages.
·
Tiffin/Food/Milk/Lunch allowance paid in cash with
deduction for leave or absence etc. may not be treated as wages.
·
Tiffin/Food/Milk/Lunch allowance paid in kind i.e.
canteen subsidy/food subsidy etc. may not be treated as wages.
(Earlier instructions were issued vide letter No.P-11/13/97-Ins.IV dated
2.2.1999)
Gazetted Allowance
Certain
factories/establishments are paying gazetted allowance to its employees in lieu
of duties performed by them on gazetted holidays. Such gazetted allowance is
not wage for the purpose of Sec.2(9) of the ESI Act. However, it will be wage
for the purpose of Sec.2(22) of the ESI Act and the contribution are to be
recovered on such payments.
Wages and Dearness Allowance for Unsubstituted Holidays
Such wages and dearness
allowance paid to the employees for the unsubstituted holidays are to be
treated as wages under Sec.2(22) of the Esi Act and the contribution is
payable. High Court of Gujarat in the case of ESIC Vs. New Assarw Manufacturing
Co.Ltd. held the same view.
Exgratia Payment During Strike for Travelling Expenses
Like conveyance allowance if
any exgratia payment is made during the period of strike to some of the
employees to incur certain travelling expenses such amount will neither be considered
as wage under Sec.2(9) nor under Sec.2(22) of the ESI Act and no contribution
is payable on such amount. High Court of Bombay in the case of ESIC Vs. Willman
(India) (P) Ltd. in case No.210 of 1976, held the same view.
Interim Relief
Interim relief paid to the
employees is normally paid when either the wage is under revision or when the
payment of Dearness Allowance is delayed due to any reason. Whatsoever may be
the case, if the interim relief is paid to the employees by any employer, the
same will amount the wages within the meaning of Sec.2(22) of the ESI Act and
contribution is payable thereon.
Saving Scheme
Certain
factories/establishments are contributing towards the saving scheme for the
welfare of the workers. Such amount paid by the employer as his contribution to
the saving scheme, will not constitute wages under Sec.2(22) of the ESI Act and
the contribution is not payable. (Earlier instructions were issued vide Memo
No.P-12/11/4/77-Ins.IV dt. 15.11.80)
Attendance Bonus
It is a special allowance
being paid by certain employers to their employees to discourage the workers
from absenting from the job. Any amount paid by the employer to its employees
as Attendance Bonus will constitute wages under Sec.2(22) of the ESI Act and
the same opinion was held by Bombay High court in the case of ESIC Vs. Indian
Dyestuff Industries Ltd.. However, the periodicity aspect has to be kept in
mind. In case the periodicity is more than 2 months, the same will not
constitute wages and no contribution will be payable as in the case of
incentive bonus.
PAYMENT MADE TO RICKSHAW PULLERS,HATHRAIRY
PULLERS AND TRUCK OPERATORS (INCLUDING LOADING & UNLOADING CHARGES WHEN THE
LOADERS/UNLOADERS ARE THE EMPLOYEES OF THE TRUCK OPERATORS:
Rickshaw pullers, Hathrairy pullers and Truck
Operators (who bring labour with them) no contribution is payable on the amount
paid by the employer if the amount paid is lumpsum amount including
loading/un-loading charges and no separate wages are paid by the employer.
Similar view was held by Bombay Division Bench
in 1990 in the case of Raisaheb Tekchand, Mohate Mills Vs. R.D. ESIC.
Hamals/Coolies Employed at a Particular Time
Where Hamals & Coolies are
employed at a particular place and a particular time, outside the premises of
the factory/establishment to perform a specific job on the spot in such cases
no contribution is payable on the amount paid to such Coolies/Hamals, however
the contribution is payable on the amount paid to the coolies and hamals for
services rendered within the premises of the employer.
Bombay High Court in the case of Parley Bottling
Co.Ltd. VS. ESIC,Bombay
1989 and Supreme Court in the case of ESIC
VS.Premier Clay Products, have held this view.
SHORT PERIOD CONTRACT FOR SERVICE - ELECTRICIAN,
CARPENTERS, MECHANICS, PLUMBERS ETC./REPAIR WORK DONE ON SHOP
In such cases also contribution is payable on
the amount paid by the Employer if the services are rendered within the
premises. This view was also held by Punjab and Haryana High Court vide its
judgement dated 29.3.84 in the case of Modern Equipment Vs. ESIC in Civil
Appeal No.3218 of 1989.
Expenditure on Servicing of Machines
No contribution is payable on
the servicing of machines where the job awarded is to the Engineer and instead
of contract of service, there is a contract for service for servicing of
machines.
Expenditure on Annual/Periodical Services Contract
In the
factories/establishments certain amount is being paid by the employer to the
supplier of machines or to the firms of repute for the annual/periodical
servicing of the machines and for such purposes the contract is awarded. In
such cases no contribution is payable on the amount paid for annual/periodical
service contracts.
Commisssion to Dealers/Agents
Where dealers/agents are
appointed by the employers but no regular wages are paid and it is not
obligatory on the part of such dealers/agents to attend to the factories/
establishments and they are paid commission only on the quantum of sales, in
such cases the amount paid by the employer as commission/dealership does not
constitute wage under Section 2(22) of the ESI Act and hence no contribution is
payable.
Service Contract
Amount paid to an organisation
for maintenance of Machinery/Equipments as part of service contract will not
attract ESI contribution.
PAYMENT MADE TO LABOUR CONSULTANTS, LAWYERS,
ENGINEERS, COUNSELS, CHARTERED ACCOUNTANTS:
The amount paid by the employer to labour
consultants, lawyers, engineers, counsels, chartered accountants does not
constitute wage as per provisions under Section 2(22) of the ESI Act and hence
no contribution is payable.
The following items will form part of the wage
both under Section 2(9) i.e for considering the employee for the purpose of
coverage and Section 2(22) of the ESI Act for the purpose of charging of
contribution:-
·
Matinee allowance which is being paid to employees
in Cinema Houses.
·
Shift allowance paid to employees who work on shift
duty at odd shifts.
·
Location allowance paid, in addition to Dearness
Allowance to meet the high house rent.
·
Compensatory allowance.
·
Cash handling allowance paid to Cashier.
·
Supervisory Allowance.
·
Additional pay paid to training staff.
·
Charge allowance
·
Steno/Typist allowance
·
Plant allowance
·
Honorarium for looking after the
hospital/dispensary
·
Computer allowance
·
Gestetner/Photocopier/Printer allowance
·
Personnel/Special allowance
·
Machine allowance
·
Convassing allowance
·
First-aid allowance
·
Personnel allowance - Pay over and above the basic
wage and Dearness allowance for skill, efficiency or past good records.
·
Area allowance - given to employees living in a
particular area to meet the high cost of living in that area.
·
Exgratia payment if payment is made within an
interval of two months.
The following items will not
form part of the wage either under Section 2(9) or under Section 2(22) of the
ESI Act:-
·
Payment made on account of un-availed leave at the
time of discharge.
·
Commission on advertisement secured for Newspapers,
if not paid to the regular employee.
·
Fuel allowance/Petrol allowance
·
Entertainment allowance
·
Shoes allowance
·
Payment made on account of gratuity on
discharge/retirement.
·
Payment made on encashment of leave.
-------------------------------------------------------------------------------------------------------------------------
Hope above information will be useful.
Namo…..
Regards,
Girish Jayram Vivalkar
IMPORTANT:
Information in this blog is being provided as-is without any warranty/guarantee of any kind.
This blog is intended to provide information only. If you are seeking advice on any matters relating to information on this blog, you should – where appropriate – contact us directly at girishvivalkar979@gmail.com with your specific query or seek advice from qualified professional people.
We encourage you to take steps to obtain the most up-to-date information and to confirm the accuracy and reliability of any information on this blog in general by directly communicating with us.
Disclaimer - IMPORTANT
Privacy Policy:-
We do not share personal information with third-parties nor do we store information we collect about your visit to this blog for use other than to analyze content performance through the use of cookies (see below), which you can turn off at anytime by modifying your Internet browser’s settings. We are not responsible for the republishing of the content found on this blog on other web sites or media without our permission.
Terms and Conditions:-
All content provided on this blog is for information purpose only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this blog site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.
Blog Comments Policy:-
The owner of this blog reserves the right to edit or delete any comments submitted to this blog without notice. The owner of this blog is not responsible or liable for any comments made by others on this blog.
Cookie Policy:-
This site uses cookies which are small text files that are placed on your machine to help the site provide a better user experience. In general, cookies are used to retain user preferences and provide anonymous tracking data to third-party applications such as Google Analytic.
As a rule, cookies will make your browsing experience better. However, you may prefer to disable cookies on this site and on others. The most effective way to do this is to disable cookies in your browser. We suggest consulting the Help section of your browser or taking a look at the About Cookies website (http://www.aboutcookies.org/ ) which offers guidance for all modern browsers.
I hope the above Disclaimer will give you my concern for your privacy and security and would like to inform that this blog is only founded for the purpose of information purpose only.
