Night Allowance and ESI Deductions: Can Anyone Clarify This for Me?

Hi everyone, will ESI be deducted for the night allowance? Please clarify.

Thanks,
Suresh K.

ESI is deducted from the gross salary, and night allowance is variable pay, so it will not be considered for deduction.

Regards,
Shaikh

Dear Suresh,

ESI is to be paid on all allowances, except for those allowances that are paid for defrayal purposes, such as washing allowance, etc. Furthermore, any remuneration paid to an employee, regardless of its nomenclature, requires ESI payment.

Regards,
[Username]

Night shift allowance is variable, but it also comes under ESI deduction.

Regards,
Varaprasad
Hyderabad

The ESIC Amendment states that there will be no ESIC deduction if the nature of the allowance is not part of attendance. For example, allowances like washing allowance, conveyance, and any other allowance that is not given regularly. If there is a gap of more than 02 months for any allowance being given regularly, ESIC deduction will not apply.

Kindly elaborate on your comment regarding ESI deduction on night allowance.

Regards,
Shaikh

ESIC Deduction from Gross Salary

ESIC is deducted from the Gross Salary. If your salary structure includes a fixed or variable night allowance, then I think ESIC will be applicable.

Regards

Hi Bunti,

In our factory, there is only a general shift (9 to 5:30). Some days after 5:30 pm, the workers continue working past midnight or into the next morning. For this, we provide a night allowance of Rs. 100/-, for which we have to deduct ESI.

Thanks,
Suresh K.

Hi, night allowance is applicable for ESI, as the ESI is applicable for overtime as well.

Regards,
Nimesh Paul
Stringz - HR Consulting, Staffing, Recruiting in Kerala
Thank you.

Yes, please refer to the directions of the Madras High Court, which state that payment made in pursuance of the agreement squarely falls within the definition of 'wages' (ESI Corporation, Madras V. Amalgamations Repco Limited, Madras - 1983 (2) LLJ 193).

Regards,
Rajusiachen

Hi everyone, the night shift allowance will be considered for ESI contribution as per the Act. For any clarification, please visit the ESIC portal on the web for "wages."

Regards,
Kosal Raj.

Dear Suresh K,

Components of Salary

There are two parts to the salary: a) Daily Salary, i.e., basic and all allowances, and b) Reimbursement. Though washing allowance, conveyance allowance, etc., are paid in the monthly salary, they are considered reimbursements. If an employee is not issued a uniform and there is a transport facility, then you have to deduct the ESI contribution.

Night Shift Allowance

As per my knowledge, in many companies, they have second and third shift allowances, and companies are liable to deduct ESI contribution because it is an allowance that is paid in their monthly salary.

Regards,
Clement

Dear Cite members,

Clarification on ESI Contributions and Allowances

I want to clarify one thing: just by mere "NOMENCLATURE," you cannot escape from the payment of contributions. The main concept of considering allowances such as washing allowance or shoe allowance is because these allowances may represent defrayal expenses. In other words, due to the nature of the work or the work environment, an employee may be required to maintain certain items like a uniform or shoes, which should be properly established by the employer.

Furthermore, all reimbursed allowances against actual expenditures incurred may be exempted from the ESI.

One key point to remember is that all remuneration paid in cash, fixed in nature (though it may vary depending on the number of days worked), and with a payment periodicity of less than two months are covered under the ESI.

Any amounts paid by the employer in kind—i.e., those not specified in the terms of the service agreement or provided as reimbursement for actual expenses—may be exempt from the ESI.

I hope this clarifies the issue.

Thank you.