Understanding ESI Act: Should Monthly Bonuses Be Included in ESI Salary Calculations?

As mentioned, the forum bonus can be paid on a monthly basis and can be part of CTC.

Now my query is, for the calculation of eligibility under ESI, the bonus paid on a monthly basis should be treated as ESI salary.

Furthermore, do we have to pay ESI on the bonus paid for employees covered under the ESI Act? I hope I am clear.

Thanks, Subhash Arora

Bonus paid monthly or at an interval of not exceeding two months as part of gross salary or CTC shall be taken as wages for deciding eligibility and contribution payable. A careful interpretation of the verdict in the case of ESIC vs. Bata reveals that if the bonus is paid on a monthly basis as an agreement between the employer and employee (showing the bonus in CTC itself is proof to show that the bonus is a part of remuneration and not dependent upon the profitability of the firm), the same can be taken as "additional remuneration paid at an interval of not exceeding two months". Otherwise, there should be a separate agreement with employees (in general) to the effect that the total bonus due will be disbursed in monthly installments due to reasons stated thereon. The same will be the case of incentive bonus paid. If the minimum incentive is shown as part of the salary (CTC), then it will also come under the heading 'wages/salary'.

Regards,
Madhu.T.K

Thank you, Mr. Madhu,

I have a related question. Is it necessary or obligatory to enter into an agreement between the employer and employee stating that the statutory bonus will be paid on a monthly basis if the bonus is already being paid monthly and included in the Cost to Company (CTC)?

Thank you again,
Subhash Arora

Dear,

If you pay a bonus on a monthly basis, then it will be a part of the ESI salary, and ESI will be deducted from it.

Thanks,
J. S. Malik