ESI Deductions on Monthly Incentives: Is My Company Doing It Right?

Inquiry About ESI Coverage on Incentives

I have learned that incentives do not fall under ESI coverage. My company distributes incentives at the end of every month and deducts ESI from them. Is this a correct practice? Please advise me.

Regards

Any incentive shown in the payslip every month is covered for ESI deductions.

(22) “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 22 [any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or lay-off and] other additional remuneration, if any, paid at intervals not exceeding two months.

Our company gives salaries through bank transfers and pays incentives in cash. On the pay slip, we only show the basic salary. Thank you.

It's right to deduct ESI from performance incentives. It's generally considered overtime, but the company is unwilling to call it overtime.

The reply posted by Mr. Ingle is correct. However, if you pay this incentive quarterly, it will not fall under ESI, as shown in Mr. Ingle's reply in blue.

Regards,
Niraj Saran
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