Sr. Manager Hr/admin
Sr. Hr Executive
+1 Other

Dear Seniors,
My company is going to apply KRA (Key Responsibility Area) system from April 2017, in which employee will get increment in Incentive form. Example if A is earning 10000 then he will get 10% of his salary as incentive if he fulfill all targets. but he will get Incentive at quarterly basis.. means incentive of APRIL, MAY, JUNE wll credit in Salary of June Month.
My question is that how should I show it in monthly salary and how to calculate ESI ? is ESI applicable on incentive?
What is the perfect way to show incentive in Pay Slip? May be employee get Incentive in one month and next month it could be 0.
27th April 2017 From India, Delhi
If incentives are paid monthly then ESI will attract on the incentives as well. If it is paid quarterly/half yearly / annually then it will not affect.
Any how its better to pay incentives separately & declare as incentives
27th April 2017 From India, Bangalore
Dear Monika,
If the incentives are paid as a part of salary then it will surely attract ESIC contribution, Thus advisable not to pay along with salary to avoid ESIC. But yes it will be part of their annual income thus it will come under their taxable income.
28th April 2017
Increment and Incentive are two different thing altogether, Incentive is not a salary component and hence not required to be shown in Payslip/Salary Sheet as told by above members. On the other hand Increment is a Salary hike and has to be paid monthly which is deductible for all Statutory applicable.
29th April 2017 From India, Ahmadabad
We are giving employees incentives every month by cash. but this month we decided to add incentives with their salary.Is ESI applicable for incentives added with salary every month.
Kindly advise on this matter.
27th May 2019 From India, Chennai
Mr. Arun,
Yes, ESI will be applicable if you release incentive with Monthly Salary.
28th May 2019 From India, Delhi
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