Understanding ESI Applicability for Driver Salary Reimbursement

Dear [Manager's Name],

One manager has hired a personal driver for his car, who takes the manager to the office, brings him back home, and follows the manager's instructions while on duty. The manager pays Rs 8000 per month to the driver. The company reimburses the same Rs 8000 to the manager against the driver's salary.

Now, my question is whether ESI (Employee State Insurance) will be applicable to the amount paid to the driver.

Best regards,
J S MALIK

Dear Mr. Malik,

Driver is not on the company's payroll; hence, the company is not liable to pay contributions for ESI. However, you should check with your Accounts department to determine under which head the reimbursement for the driver's salary is booked. If the same is booked against the driver's salary, then ESI contributions would be payable.

Thanks,
Rajeev Kumar Saxena
9818111867

Dear J S MALIK,

One manager has hired a personal driver for his car, who transports the manager to the office, back home, and performs duties as instructed by the manager. The manager pays Rs 8000 per month to the driver, and the company reimburses the manager with the same amount against the driver's salary.

Now, the question is whether ESI will be applicable to the amount paid to the driver.

Thank you.

Dear Mr. Malik,

Since the amount is being paid to the manager as a perk and the payment is being made on a reimbursement basis, this would not attract ESI contribution. Furthermore, the driver is neither on the company's payroll nor employed through a contractor.

Regards,
Manoranjan

Dear Malik,

Driver salary is part of an employee's entitlement as a benefit provided by the organization. Hence, there will be no ESI applicable to the employee's driver.

Dear Malik,

As detailed by others, if the driver's salary is being paid as reimbursement, then he will not be covered under ESI. However, if the driver's salary is being paid separately to the driver as a salary, then he shall be covered under the ESI.

Regards,

Amit Seth

Driver Allowance is being paid to enable the employees to appoint a driver at their own level. These drivers, employed, are not being paid salary directly by the company.

In cases where "Driver Allowance" is being paid to an employee and the driver is not being engaged by that employee, then the allowance paid as such will be considered as wages.

In cases where "Driver Allowance" is being utilized appropriately, then the driver so engaged will be covered as an employee, and contributions will be payable on the amount paid to the driver as salary and booked in the ledgers of the employer under the heading "Driver Allowance."

Hi all,

My query is that we have engaged an ETP Operator in our factory through ABC agency. The operator is an employee of this agency, and he maintains our effluent treatment plant daily for eight hours. We are paying Rs.7865/-, including service tax, to this agency. Our MD asked to deduct ESI on the above amount. Is ESI applicable to that amount?

Please suggest.

Regards,
Rajesh

Dear Mr. Rajesh,

Why are you putting questions in between? I have asked a query, and the discussion is ongoing on that. For your query, you should raise questions in a professional manner.

Thank you.
J.S. Malik

Dear Mr. Malik,

From the legal point of view, Mr. Saxena is absolutely right, and I fully agree with him.

You will have to check the narration of the books of account to see under which head the reimbursement for the driver's salary is booked. Again, I agree with Mr. Saxena that if the same is booked against the salary of the driver, then ESI contributions would be payable.

Points to be discussed: I would like to ask Mr. Saxena the following:

1. I agree with you that ESI would be applicable, but my query is who will bear the cost? Whether it will be the Company or the Manager?
2. The employer and employee relation is between the "Manager and Driver," thus the Manager has to pay. Alternatively, the Company can facilitate an agreement between the Manager and his personal driver, with salary bifurcation shown clearly. The Company should fill out a "Declaration Form" under the ESI Act (showing the driver as a contract employee, which will be useful in case of any casualty) and pay contributions as we do for petty works like repairing and maintenance, according to my opinion.

3. From a legal standpoint, the Company is not liable to pay ESI as there is no employer-employee relation with the said driver. However, from a statutory compliance perspective, the Company must pay.

4. In the scenario where a contractor without an ESI Code is conducting repairs on the Company's premises, the Company is required to pay that amount, as is commonly practiced.

Finally, I would like to thank Mr. Malik for raising this important issue.

Regards,

Vijay Vashisth
Head HR
09992334610
Nippon Talbros Bawal
Rewari

Dear Mr. Malik,

Driver is not on the company's payroll; hence, the Company is not liable to pay contributions for ESI.

However, you should check with your Accounts department to determine under which head the reimbursement for the driver's salary is booked. If it is booked against the driver's salary, then ESI contributions would be payable.

Thanks,
Rajeev Kumar Saxena
9818111867

Dear,

One manager, X, has hired a personal driver for his car, who takes the manager to the office, brings him back home, and follows the manager's instructions. The Manager pays Rs. 8000 per month to the driver. The same Rs. 8000 is reimbursed by the Company to the Manager against the driver's salary.

Now, my question is whether ESI will be applicable to the same amount paid to the driver.

J S MALIK

Dear Malik,

If the driver has to be covered under ESI, shouldn't he submit his declaration form (as per norms)? And if he is entitled to ESI, would he not be entitled to other basic benefits as well?

Thank you.

Dear Mr. Malik,

The salary for a driver is reimbursed by the employer, which means he is indirectly engaged by the employer. Hence, it attracts ESI contribution. Furthermore, the driver comes under the scope and definition of an 'Employee' of the ESI Act. It is prudent to cover the driver under ESI and ensure that he derives the benefits of the ESI Act.

Regards,

R. Subramanian

Mr. Mallik,

According to the best of my knowledge, we are booking the driver's salary in the staff salaries account directly, and we have to pay the ESI to the driver. In case we are booking it under other heads, then he is not on our rolls, and we can't pay the ESI.

Regards,
SURESH - HR

Dear,

I have mentioned in my query that we are showing it as reimbursement against the driver's salary. He is not a company employee, so he cannot be booked under staff salary head. Please give your valuable suggestion on this topic.

Thanks,
JS Malik

If the driver is paid by the official from his personal funds and is not covered under ESI/PF, etc., but if the accounts personnel include this payment in the driver's salary or any other account related to wages, it should definitely be treated as wages by ESIC.

If it is accounted as reimbursement of a driver's salary, definitely it would be treated as wages under ESI.

Hi everyone,

As the direct relationship between employer and employee could not be established, there is no question of attracting ESI. If that is the case, then PF, PT, and LWF will also fall under the same purview.

Thanks & Regards,
Sunil

Dear,

Still, we have not reached any conclusion. I am waiting for someone who can conclude the query.

Thanks,
J.S. Malik

Mr. Vijay Vashisth,

You are absolutely right, and I say thank you to Mr. Malik for raising the valuable and conceptual point. Keep interacting in the future as well.

Karamvir Chhillar
Flexpack Technologies Pvt Ltd (Bawal)
Sr. Executive HR & Admin
09813862929
Haryana

Since the driver is not engaged by the company and he is also not on the company's payroll, ESI coverage is not required. If the driver is part of the Manager's reimbursement, then he is not considered to be under the company's employment.

Dear Malik Sir,

As per my knowledge, reimbursements are benefits to the employee (for Mr. Manager) to whom it is credited directly even if the driver is not on the company's payroll. Therefore, the driver is not entitled to the benefits like other members of the company.

With regards,
Rajesh Chauhan