You all know that the Overtime Wages attaracts statutory deductions like ESI & PF. Can you throw some light on whether the productivity based production incentive attracts ESI and PF contributions? The production incentive means in reality the Production based incentive and not just a terminology given to OT to avoid ESI and PF!
This is an issue which can't be replied in straight jacket formula. I humbly request to all hon'ble members of this forum not to comment on any issue unless studied at length,more particular in legal matters.
production incentive scheme linked with productivity neither attracts ESI nor PF .the renowned case is of whirlpool decided by SC of India.
every production scheme has to be examined on the facts and terms before reaching to any conclusion.
PF is not attracted on payment of overtime.Moreover overtime is not an allowance.another angle of this issue is that once u deduct ESI on production incentive, u accept the payment as part of wages, then why not PF on such amount?
at the end ur scheme and its drafting is the answer of ur question.simply because we name a payment as production incentive, will not be out of purview of ESI and PF. Authorities have all powers of lift the veil from such payments
chief editor,BUSINESS MANAGER
The question is only about ACTUAL PRODUCTION INCENTIVE and hence I restrict my response to this.
The Act envisages all incentive payments within the definition of Wages provides these payments are made monthly.or once in two months.Whirlpool case is about the payment where it is made not every month or once in two months. I have given an extract of this judgement for you to read. SC emphasises 'provided the periodicity of payment is more than two months."
All production incentives are covered under the definition of Wages provided that the periodicity of these payments are two months or less. Pl see the brief of Whirlpool Judgement below
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.(Earlier instructions were issued by this office vide Memo No.T-11/13/53/19-84-Ins.IV dt. 19.9.84, Memo No.Ins.III-2(2)/2/69 dt,. 26.12.73, Memo No.T-11/13/54/18/82-Ins.IV dt. 14.7.82 & Memo No.D/Ins.5(5)/68 dt. 18.9.88.)
I totally agree with Mr. Anil Kaushik. Definitely this is not an issue which can be replied in strainght jacket formula. We should understand that even before we join an Organisation as HR Professional, the Organisation will have formulated few things and that will be followed by all. Many a times we, even after realizing that it is wrong or marginally faulty we tend to overlook and just follow. This is what is bothering!
Each law or rule can be interpreted in different ways by different people. Many a times the law itself will be ambiguious and every person on earth will interpret in his own way. But ultimately who is going to suffer? The Management will ask the HR Professional as what you have done? I know instances where the complete onus falls on the HR.
Infact I am surprised by the way our honourable members of this site as responding. They are so athentically say that this is wrong or right! My only request to all the honourable members is that to look the issue thoroughly and then comment authentically. One member says Production Incentive does not attract ESI. Another member says no it attracts ESI. This will definitely tell that we members does not agree each other and what is following in our Organisations itself become authentic. If not why there should be any confusion?
If you have gone through my posting, you would have noticed that this type of situation is being faced by our friends and my only intention of posting this topic was to make aware of the the actuals with postings from learned members like Mr. Anil Kaushik, Mr. T.Sivasankaran etc.,
Once the law is understood in letter and spirit, there will not be any confusion within the HR community and life becomes easy. That was the intention of my posting.
Even if more number of members want to put in their views, they are welcom. If I am wrong any where during my this posting, I stand corrected.
To be frank, I am not following many of the rules strictly laid to be followed by a HR man. In my company the management had already devised its own rules, allowables, deductions, exemptions etc. So ultimately the HR policy prepared by me just stands as a mute spectator.
Stictly speaking I have pointed them as many of these are gross violations. Who bothers? So if the issue goes beyond our hands, it's better to jump off the boat for safety than to teach them a lesson or try to tame an amok elephant. For many issues we may not have the solution because much of the damage would have been caused when we joined the job. It is useless to repair or set right the massive errors as the employees may wake up to revolt if it is rectified.
Reality differs from what we have learnt and what has been laid as rules and Acts.
One of the most important qualities a Professional should exhibit is Courage.
Many a times we show boldness and we get into problems. And the famous saying "once bitten twice shy" starts operating from here.
Just see the subtle difference between boldness and courage.
the ability to face danger, difficulty, uncertainty, or pain without being overcome by fear or being deflected from a chosen course of action
willing and eager to face danger or adventure with a sense of confidence and fearlessness
To be courageous, one need to develop abilities. Abilities include developing Knowledge. That is precisely what Mr Srinaren is talking about.
Just a bit of advice. We should never talk that " my management is not listening" "my management listens only to accounts" and the like.
Some of the legal issues I had to face internally and convince the organisation where i worked include:
1. Leave encashment on resignation
2. PF for Trainees(Under certain circumstances)
3.Minimum wages..convincing the Top Management that incentive can not be included for purposes of Minimum Wages.
4.Over Time Wages
5. Compensatory Holidays
I can list more . These issues keep coming. We need to do our home work well and keep highlighting instead of saying I cant help.
Probably Citehr can give you all the knowledge inputs to make you courage.
To be couraqgeous, it is just not enough to have the willingness to face danger. We need to develop the ability to face.
Abimanyu is known for boldness.
His father Arjun is known for courage