ESIC Applicable On Performance Incentive? - CiteHR
Harsh Kumar Mehta
Consultant In Labour Laws/hr
Asst.manager -hr
Apex Management
Labour Laws Consultants
Korgaonkar K A
+6 Others

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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?

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.

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.
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.
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.
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
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.
As per there is no other way, however I will try to find out .....
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.
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.

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