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Dear Members,

I know this topic has been discussed quite often but I have few very specific questions. Would appreciate if someone could help me with them:

I understand that the wage limit (as of Nov 2013) for coverage under the ESI Act is Rs 15,000 (Rupees Fifteen Thousand) per month and the Employer Contribution is 4.75% and Employee Contribution is 1.75%

1. The ESI calculation is on what components of the CTC?

2. We have sales team for whom the Sales Incentive component is almost 50% of CTC. Can this component be included while considering the ESI eligibility? In that case will we have to include the Incentive part while calculating the ESI payable

3. How does the Eligibility and ESI calculation get affected if the Employees under perform and do not earn the Incentive.

Thanks in advance

From India, Chennai
Harsh Kumar Mehta

1. Incentives or allowances whether you call as "sales incentives" or by whatsoever names if paid/payable to an employee as per terms of the contract of employment whether express or implied are part of wages as defined under section 2(22) of ESI Act, 1948.
2.ESI Act, 1948 and rules/regulations framed thereunder are not concerned with "under performance" by any employee/salesman. The only relevant point is the amount of wages including sales incentive or any allowance on which contribution is required to be paid.
3. I will suggest you to please get the issue settled by writing to the appropriate office of ESIC (asking their decision in the matter) to which your unit is attached so that in the event of conflicting decision, there may not be any recoveries due to non-payment of contributions under ESI Act on such sales incentives by the establishment.

From India, Noida
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