Harsh Kumar Mehta
Consultant In Labour Laws/hr
Apex Management
Labour Laws Consultants
Korgaonkar K A
Ba,llb,mpm,dir&pm,dll&lw,d.cyber
Humanright
Consultation
DharaParikh1989
Accountant
+5 Others

Thread Started by #DharaParikh1989

Hello,
We are providing manpower in various companies on contractual basis.
ESIC is applicable to us.
We already pay ESIC on basic salary of employees.
Now we want to pay some amount as performance incentive.
Is ESIC applicable on Performance incentive too?
14th August 2015 From India, Vadodara
Hi Dhara,
ESIC is always paid on Gross not on Basis. Employees drawing salary less than or equal to Rs.15000/- are eligible for ESIC coverage.
If in any particular month bonus / incentive / over time paid , then have to pay ESIC amount on it also.
14th August 2015 From United Kingdom, London
Sir, all type of incentives paid in connection with or relating to work are wages under section 2(22) of ESI Act, 1948 and contribution is required to be paid if the concerned employee is covered/coverable under said Act.
14th August 2015 From India, Noida
As per me If you are willing to save the company cost than what all you can do is, you can disburse it in the name of quarterly performance incentive/production incentive as any other payment/remuneration does not attract ESI if it is paid at intervals exceeding two months.
14th August 2015
Yes, if incentive is not regular and not paid on monthly basis then then esic is not applicable. For more details log on to esic website they have mentioned everything in more detail.
15th August 2015 From India , Nasik
Hi Dhara, If any incentive is paid on monthly basis, it is definitely falls within the definition of Wages and ESIC contribution is payable. Regards P K Sharma
16th August 2015 From India, Delhi
Dear Mr. Dhara, You can pay the incentive monthly. But ask your accounts to booked in quarterly basis. Prepare on voucher and attach signed statement without mentioning the month. Thanks.
17th August 2015 From India, Coimbatore
As per there is no other way, however I will try to find out .....
17th August 2015
give monthly basis incentive as advance and settle the quarterly amount as accounting. e.g. jan. inc. 5000-/, feb inc. 2645/-, mar. inc. 2410/-. then show as jan adv. 5000/- feb. adv. 2600/-, mar adv. 2400/-, then after in april calculate quarterly as jan. inc. 5000-/, feb inc. 2645/-, mar. inc. 2410/- minus jan adv. 5000/- feb. adv. 2600/-, mar adv. 2400/-= 55/- payable. disburse 55/- in bank make statement of 10055 and minus the figure given as advance.
18th August 2015 From India
Sir, if the amount so arrived at as a performance incentive is paid monthly as an advance, but adjusted after close of a quarter, even then the same is subject to contribution under ESI Act, 1948. The term used in the definition of "wages" is "or payable". Actual payment of wages is not so important, but the issue is whether the said wages were due and payable at the close of a wage period.
18th August 2015 From India, Noida
Dear Mr. Mehta,
If employer gives fix loan every month say Rs. 2,000/- and recover that loan after three months in quarterly incentive. In that case in account books incentive will be paid after every three months but employee will get some amount ( not exact incentive amount) every month.
Will ESI contribution will be still payable on incentive ?
We also pay incentive every month. Don't wish to delay. what is the best way out ?
30th August 2015 From India, Hyderabad
Is it OK if employer pays after every two months ? Or it should be minimum three months ? Or it should be two months and one day ? As per my knowledge law says above two months .
30th August 2015 From India, Hyderabad
Dear Friends,



I have gone through the responses up till now and would like to submit as under:

Question is on Performance Incentive. One can call it as Incentive Bonus or Production Bonus. It is an additional remuneration.

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.

The queriest said that this payment is not possible to make it quarterly. Somebody suggested him to pay it monthly but to so it on quarterly basis so that no ESIC attract.

Please bear in mind that, when such additional remuneration is paid at interval beyond two months, the SSO has to verify thoroughly as to whether there is any agreement / settlement between the employer and employees, either express or implied and report the facts with documentary evidence for taking decision by RO as to such payment attracts ESIC or not.

Some employers are showing certain additional payments payable once in a quarter and paying some amount every month as advance against such additional payment. They book the final amount i.e. total of three month advance payment as quarterly incentive as suggested here also by one of the learned members. This payment amounts to wages only under the Act and ESI attract on it unless there is an agreement / settlement to make this payment quarterly or so, on the basis of performance-quarterly or so.

One should not forget that such additional payment is based on monthly performance, generally.

Hope everyone understood what I mean to say.
30th August 2015 From India, Mumbai
If the amount of performance incentive is paid once or twice in year then it will not calculated in ESIC. But if it is paid in every month, then it will calculated.
30th August 2015 From India, Kolkata
dear sir,
there are some employee, whom gross salary is less than esi limit. but we pay incentive monthly basis and they cross esi limit. then they will be eligible for esi.
2nd August 2018 From India, Gohana
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