Dear Mr. D. BALAVINAYAGAM,
Sir, to understand the definition of wages under the provisions of the Employees State Insurance Act, I am reproducing the definition below:
“Wages” means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled. It includes any payment to an employee in respect of any period of authorized leave, lock-out, 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 the employer to any pension fund or provident fund, or under this Act;
(b) Any traveling allowance or the value of any traveling concession;
(c) Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(d) Any gratuity payable on discharge.
The ESI contribution is payable on all the allowances except the value of traveling expenses reimbursement and washing allowance as of the date. If the production incentive paid to the workers every month with the wages/salary is considered wages for the purpose of contribution under the provisions of the Employees' State Insurance Act, 1948.
The Employees Provident Fund & Miscellaneous Provisions Act, 1952. The definition of wages under the provisions of the Act is:
2(b) “Basic wages” means all emoluments earned by an employee while on duty or on leave or on holidays with wages in either case according to the terms of the employment contract and paid or payable in cash. This does not include:
(i) The cash value of any food concession;
(ii) Any dearness allowance (all cash payments by whatever name called paid to an employee due to a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission, or other similar allowance payable to the employee for his employment or work done in such employment;
(iii) Any presents given by the employer.
Therefore, the contribution under the provisions of EPF & MP Act 1952 is payable only based on basic wages. In a writ petition No.15443/2009 between APFC vs. G4 Security, the Punjab & Haryana High Court held on 1st February 2011 that minimum wages can be bifurcated into allowances and Provident Fund contributions will not be attracted on allowances. According to the judgment of the Honorable Punjab & Haryana High Court, the management is liable to pay contributions only on Basic wages.
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