Incentive - Incentive Pay - CiteHR
Madhu.T.K
Industrial Relations And Labour Laws
Harsh Kumar Mehta
Consultant In Labour Laws/hr
Adoni Suguresh
Sr.executive (per & Adm)
Rdsyadav
Educator, Management Consultant & Trainer
Pon1965
Construction
+3 Others

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Dear All,
As we all know that incentive is variable allowance so I have two question..........
1) Can we mention incentive in pay slips (because if we will mention in pay slip so the employee will get a different amount in every month)?
2) Will esi be deduct gross wage included incentive?
Please reply......
Thanks & Regard's
Nitin Sharma

Since incentive is an amount purely depended on performance, it is advisable not to show the same in the pay slip. If included and paid every month, the same will be considered as part of salary for the purpose of ESI contribution.
Madhu.T.K

Dear Sir,
I agree with you but if we will not show in pay slip so how to pay incentive??? & Suppose if an employee earn below or equal to 15000 (included incentive) in jan and in second month he / she earn more than 15000 (included incentive) and next to next month he / she earn below 15000 so in that case what should we do regarding esic?? Should we deduct esic or not ???? Please advise sir..........
Thanks & Regard's
Nitin Sharma

ESI contribution shifts only once at the time of change of contribution period and with a change in salary, say increase in salary over Rs 15000, in one month, the employee will not become out of coverage. He becomes out of ESI only if his salary becomes more than 15000 in April or October. Suppose that one gets more than Rs 15000 in April and accordingly, he is put out of ESI but if again in May his salary dips to less than Rs 15000, he should be brought under ESI again. This issue can be solved if we pay the incentives in every quarter and not included in the pay slip.
Madhu.T.K

Sir, It means that we should pay incentive by cash & quarterly.
hi,
You are bound to show the incentive in pay slip. But show it as advance. Anticipated annual incentive can be splitted equally in quarterly basis. Then it wont come under ESI calculations. But it calculate as annual income for IT purpose.

Incentive is variable and not construe to be part of salary. Hence should not be reflected as salary. No ESI on incentive.
If ESI is payable in case incentive is paid through payslip, then it appears to me that one is only trying to avoid or evade ESI by using a particular modus operandi. Will it not be against the law?
Someone may please clarify.
From Income tax (IT) point of view, incentive is taxable and therefore it is advisable, for convenience, you include it in the payslip, because if you pay it separately you miss it in calculating gross salary for the month of monthly Tax Deduction at Source.

If the salary is more than 15000 (incl. all allowances), the incentive can be paid thru payslip. Otherwise, separate remittances for incentives may be made in his salary account
1.Sir, the amount of "incentive" is part of wages under ESI Act, 1948 and contribution on such amount is payable.

2. Even if you pay quarterly, but calculate on monthly basis, even then it is wages and contribution is payable. The mere fact that you accumulate the said amount of incentive for first 2 months and pay total after expiry of 3rd month is irrelevant and contribution is "payable" . Please see definition of "wages"section 2(22), which lays down "paid or payable".

3. If wages are not disbursed by any unit/employer continuously for 3 months (say a defaulting unit), it does not mean that the same were not "payable" for first 2 months. Any unit or employer may book the said amounts in any form i.e. either as an advance, pay by voucher, not reflect in PAY SLIP etc.,( as per his own option, procedure etc.) if comes to the knowledge of inspecting authorities and if he takes note of the same, then I think, it will be a matter of discrepancy as a result of such inspection or verification of records.


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