Dear All,
We have deducted ESI contribution from our employees whose gross salary not exceeding Rs.15000/- as per ESI Act. Some of our employees’ salary raised on account of their monthly incentive included into their salary. This incentive scheme will be paid along with salary on a regular basis (monthly).
We have excluded this incentive (variable) for computation of ESI contribution as per the advice of ESI inspector who came for inspection at our Factory. Now, ESI authorities have raised query that to not deduct for the employees who salaries exceeding Rs.15000/- including Incentive.
Now the Question is whether Variable pay taken in to account for ESI Coverage ?
if yes, please mention the rules or amendment of ESI Act.
Request you all to kindly help in this regard.
Sarath Chandran R
Indian Furniture Products Ltd
08939182179

From India, Bangalore
Anonymous
I have also seen an Employer in NCR region who is deducting ESI on total salary including variable incentive (monthly= Rs. 2000), even if employees' salary including VI is Rs. 16000.
They are deducting ESI (1.75% = employee part) on Rs. 16000.
But in this case, VI always varies from 2000 to 2200.
Need clarification, Is this a right way?

From India, New Delhi
Dear Sarath,
Incentives paid quarterly should not be considered for the purpose of calculating ESIC. Any payment made to employee with an interval not exceeding 2 months are considered as wages and ESIC should be calculated on that.
Please refer,
wages ” means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes 1[any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or layoff and] other additional remuneration, if any, 2[paid at intervals not exceeding two months], but
does not include —
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act ;
(b) any travelling allowance or the value of any travelling concession ;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employ¬ment ; or
(d) any gratuity payable on discharge ;

From India, Hyderabad
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