Dear Mr. D.BALAVINAYAGAM
Sir, to understand the definition of wages under the provisions of Employees State Insurance Act, I am reproducing the definition of :-
“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 and includes 25[any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or layoff and] other additional remuneration, if any, 26[paid at intervals not exceeding two months], but does not include-
(a) Any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) Any travelling allowance or the value of any travelling 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 the all the allowances except value of travelling expenses reinbursement and washing allowance as on date. If the production incentive paid to the workers on every month with the wages/ salary will be considered as wages for the purpose of contribution under the provisions of Employees' State Insurance Act, 1948;
The Employees Provident Fund & Micellaneous Provisions Act, 1952. The definition of wages under the provisions of the Act is :-
2(b) “Basic wages” means all emoluments which are earned by an employee while on duty or 4[on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-
(i) The cash value of any food concession;
(ii) Any dearness allowance (that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living), house-rent allowance, overtime allowance, bonus, commission or other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) Any presents made by the employer;
Means, the contribution under the provisions of EPF & MP Act 1952, is payable only on basic wages. In a writ petition No.15443/2009 between APFC vs. G4 Security, the Punjab & Haryana High Court has held on 1st February, 2011 that the minimum wages can be bifurcated into allowances and the Provident Funds contributions will not be attracted on allowances. According to the judgement of Hon'ble Punjab & Haryana High Court, the management is liable to pay contribution only on Basic wages only.