Is ESI Applied to Extra Earnings Like Bonuses and Leave Encashment? Seeking Clarity!

Dear All,

Can anybody tell me if the gross salary is Rs. 6000.00 per month, and we are paying Rs. 500 extra as other earnings? So, is ESI applicable on other earnings or not? Also, let me know whether ESI is applicable on other earnings like arrears, bonus, leave encashment.

Regards,
Shalin Shah

Dear Shalin Shah,

Greetings!

The Act was originally applicable to non-seasonal factories using power and employing 20 or more persons, but it is now applicable to non-seasonal power-using factories employing 10 or more persons and non-power-using factories employing 20 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road motor transport undertakings, and newspaper establishments employing 20 or more persons.

The existing wage limit for coverage under the Act is Rs. 10,000/- per month (with effect from 1.10.2006).

Dear all,

Any payment made on a monthly basis will attract ESI, other earnings, and bonuses on a monthly basis. Leave encashment is not paid every month, so ESI will not be deducted.

Thank you,
J. S. Malik

Dear Mr. Shah,

The wage ceiling for coverage of employees (excluding remuneration for overtime work) is Rs. 10,000/- effective from 1st October 2006. Previously, it was Rs. 7,500/- per month effective from 1st April 2004 (Rule 50 of ESI (Central) Rules 1950).

Thanks,
Shreekanth.P.R

ESI is applicable for any kind of earnings.

ESI is not applicable on any one-time payments, like statutory bonus, leave encashment, reimbursement claims, etc.

Regards,
Amit

Dear Sir,

I also have a query. If we are given arrears with backdated effect for two months, will ESIC be deducted on the arrears?

Regards,
Shalin Shah

Dear All,

Can anybody tell me if the gross salary is Rs. 6000.00 per month, and we are paying Rs. 500 extra as other earnings, so is ESIC applicable on these additional earnings?

Also, please let me know if ESIC is applicable on other earnings such as arrears, bonuses, and leave encashment.

Regards,
Shalin Shah

Yes, ESIC is applicable to your earnings, including arrears of wages, but it is not applicable to bonuses and leave encashment.

Sumit Kumar Saxena,
9899669071, 0120-4131277

Dear Shalin Shah,

All emoluments paid to the employee other than bonus and leave encashment are chargeable under ESI. You can refer to the attachment which will guide you on this topic.

Hi Shalin,

Under the provisions of the ESI Act, the definition of wages is very broad. Now, every payment made to a workman is treated as wages, and the contributions are payable by the employee and employer. According to Section 2(22), 'wages' means all remuneration paid or payable in cash to an employee if the terms of the contract of employment, expressed or implied, are fulfilled. This includes any payment to an employee in respect of any period of authorized leave, lockout, strike (which is not illegal), layoff, and other additional remuneration, if any, paid at intervals not exceeding two months. However, it does not include:

(a) any contribution paid by an employer to any pension fund or provident fund under this act,
(b) any traveling allowance or the value of any traveling concession,
(c) any sum paid to the person employed to defray expenses entailed on him by the nature of his employment, or
(d) any gratuity payable on discharge.

In short, any payment made to a worker on a regular basis shall be treated as wages, and contributions are payable. Payment of increment arrears will be treated as wages, and contributions are payable, whereas agreement arrears will not. Annual bonus is not considered wages under the ESI Act, whereas production/incentive bonus, which is paid every month, will be considered wages. Leave encashment during the period of service may be treated as wages, whereas leave encashment at the time of discharge or superannuation will not be treated as wages.

In your case, the additional payment of Rs 500/- will be treated as wages, and contributions will be payable. For more details or clarifications, you may contact me.

Hope this serves your purpose.

Thanks,

Avinash Kanoray
Email: akanoray@sify.com
Phone: 9890752690

Question on ESI Applicability to One-Time Payments

If ESI is not applicable to any one-time payments, why does it apply to one-time payments made to people such as electricians, plumbers, carpenters, coolies, or hamals? Kindly let us know ASAP. My email address is [Email Removed For Privacy Reasons].

Regards,
Radhika