Industrial Relations And Labour Laws
Hr Executive
Accounts Assistant
Hr Assistant
Hr Executive
+1 Other

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Dear Friends,
Greetings of the Day!!!!
One of my friend is working as an HR Executive in a LIMITED firm.
he wants to know that his company has changed some changes in salary processing and its contributions.
they are calculating ESIC contribution (Employer and Employee) on the BASIC salary.
Is it right? if not how he can take legal action against the company.
Please provide the details in depth.

From India, Karnal
ESI is to be contributed on total salary and only travelling expenses reimbursements and washing allowances do not form part of salary for the purpose of ESI. Therefore, the new practice adopted by the company is wrong and as an HR person you have to advise the employer of what is correct. I don't think that you need to take any legal action against the employer; you may just advise the management that on an ESI audit the ESI will object this new practice and in such an instance that may occur in future, we will have to contribute on the omitted wages together with interest and in such scenario we will not be able to recover whatever we could collect from the employees.

From India, Kannur
Hi Shamsali,
In addition, you could also get the Notification which states that ESIC is to be calculated on the total (gross) salary, and ask your management to provide any such notification which mentions that ESIC can be calculated on Basic+DA, (which could justify their action).
It is always better to have a written proof which supports your words and actions. And explain to the management that now the employees are becoming aware and conscious specially when it is about their compensation or any benefit they are entitled to. At times the employees could even ask for a written statement about the deductions. So its better to be prepared.

From India, Pune
Hi Shamsali,
Its incorrect to have ESIC deducted only on Basic, its on total emoluments excluding Washing Allowance.
One can visit fr more info. or call us on 09665050355 for further queries.
Prodigy Technologies |

From India, Pune
Hi Shamsali,
ESIC has to be calculated only on the Gross (Total Wages Paid).. This includes the OT wages too. But the ESIC payable is excluding the washing allowance. Now put it in papers to the management. Pl make the management aware of Sections 84, 85, 85-A and 86-A of The ESIC Act, 1948 to make sure they know their problems.
Yashwanth R

From India, Bangalore
Hi shamsali,

The term " wages" has been defined in many statutes in as many as ways section 2(22) of the esic defines wages in entirely different manner for contribution parts.

" Wages means all remuneration paid or payable in cash to an employee .if the terms of the contract of employment ,express or implied were fullfilled and includes any payment ot an employees in respect ot any period of authorised leave, lock-out ,strike ,which is not illegal or layoff and other additional remuneration if any paid at intervals not exceeding two month but does not include pf contribution by employer,any travelling allowance and and gratuity payable on discharge and any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment .

An analysis of the definition of wages under section 2(22) of the acts reveals that it consists of four parts.

the first part refers to all remuneration paid or payable in cash to an employee.if the terms of the contract of employment ,express or implied are fulfilled the second part of the definition of wages includes any paymen tto an employee in respect of any period authorised leave lock out strike which is not illegal or lay-off the third part of the definition includes other additional remuneration ,if any, paid at intervals not exceeding two month.the fourth part of the definitions of the term wages does not include any contribution paid by the employer to any pension fund ,the travelling allowance or the any sum of the person employed to defray special expenses entailed on him by the nature of his employment or any gratuity payable on discharge.

it will be seen that the above definition start with the word all remuneration and as such it has been attracting controversy more particularlyt when it does not clarify which of allowance or perks will form the part of wage although the definition is inclusive and exclusive both, yet this issue has repeatedly gone to courts for interpretation in innumberable cases the esi corporation has clarified the term from time to time including lastly by memorandum No 11/13/94 -ins IV dated 201-11-2000 still it cannot be said to be exhaustive with the passage of time and fast changes in industrial relations scenario many allowance has been introduced to th employees as the welfare measures.

This mean the remittance for esic need to been done of gross salry by excluding certains components which are exempted by the esic I.e

1 Washing Allowance

2 Incentive bonus

03 Annual bonus

04 Annual Commission

05 Poduction bonus -when paid at intervel not exceeding 2 months as distinguished from being payable

06 Canteen subsidies

07 Services charges

08 Newspaper allowance- where the cost of newspapers is reimbursed to the employees

09 saving scheme

10 payment made to labour consultants lawyers engineers counsels chatered accountant.

From India, Bangalore
This practice is nothing to save amount of expenses with illegal procedure. But company can excuse of it by ESIC audit.
From India, Rourkela
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