Various Allowances in ESIC Wages
(Special Note: List, records
and details has been taken from various reliable sources.)
A. 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)
B. SUSPENSION ALLOWANCE/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)
C. 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).
D. 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).
E. 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.)
F. 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)
G. 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).
H. 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).
I. ANNUAL COMMISSION:
Sales Commission would fall within the 3rd category of wages as
defined under the 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).
J. 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).
K. NIGHT SHIFT/HEAT/GAS & DUST ALLOWANCE:
It is an additional remuneration paid to the employee for
performing duty at night 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).
L. 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:
Amount towards conveyance paid or reimbursed to any employee for
incurring expenses for specific duty related journey 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 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 Fixed allowance paid at an interval exceeding 2
months, unless such payment is made as per contract or agreement.
M. 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)
N. 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
organizations, 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)
O. 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.
P. 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.
Q. 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 utilized,
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".
R. 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 authorized 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)
S. GAZETTED ALLOWANCE:
Certain factories/establishments are paying gaz etted 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.
T. 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.
U. 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.
V. 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.
W. 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)
X. 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.
Y. 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.
Z. HAMALS/COOLIES EMPLOYED AT A PARTIULAR 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.
AA. 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.
AB. EXPENDITURE ON ANNUAL/PERIODICAL SERVICE 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.
AC. COMMISSION 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.
AD. SERVICE CONTRACT:
Amount paid to an organization for maintenance of Machinery/Equipment’s
as part of service contract will not attract ESI contribution.
AE. 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.
AF. 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, Canvassing 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.
AG. 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.
Thanks
Praveen Tripathi
Human Resource
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