Understanding ESI Act Provisions on Wages and Exemptions for Hospital Organizations

Hi Revathy,

We have a practice of paying HRA, Education allowance, and Transport allowance on a monthly basis. Do these fall under wages for ESI purposes, and are the contributions paid from this?

We pay Medical allowance bi-monthly and LTA yearly. Are these considered wages and not deemed to be wages for ESI?

Regards,
Revathy

Hi Revathy,

Generally, every allowance that is earned by an employee will be deemed as wages under the purview of the ESI Act. For example, if we are providing a washing allowance to cover the expenses of washing clothes, then the payment of the washing allowance will be considered as part of the employee's wages under the ESI Act. However, if we are providing a Heat Allowance, then ESI will apply to the Heat Allowance.

In cases where we are paying or showing LTA (Leave Travel Allowance) and Medical allowances against expenses, then LTA and Medical Allowance should not be deemed as wages under the ESI Act.

Regards,
Anuj Trivedi

Hi, I am in agreement with what Ms. Priya is saying. You can still visit the website http://esic.nic.in/ for more information on this.

On the subject, I have initiated a new topic about CitiHr Meet in Chennai. Why don't you all share your ideas on how to organize a meeting similar to the one held in Delhi so that we can exchange our views and thoughts?

Please do respond.

Sampath
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Dear Revathi,

As per the Wages Act, HRA/TA/Mobile/LTA, all the allowances except washing allowance should be calculated. ESI is applicable for a gross salary less than or equal to 10000 only.

Regards,
Aleem

Dear Ravathy,

Whatever allowance is paid on a monthly basis, it will attract ESIC. LTA does not attract ESIC. The medical allowance is paid on a bi-monthly basis and may be reimbursed upon producing actual medical vouchers, meaning it will not attract ESI deduction or coverage.

Regards,
Bhushan Dahanukar

Hi,

As per the ESI Act, I doubt there is a provision to get exemption on the following components when considering gross pay as the criteria for ESI eligibility:

1. Transport allowance
2. Washing allowance
3. Contributed EPF/pension fund

Can experts help me clarify with clear proofs how far we can legally go while synchronizing with minimum wages as well as ESI exemption on the above components?

Is there any way to get complete ESI exemption? What is the procedure? Our organization is a hospital.