ESIC Contributions: Should Conveyance Allowance Count as Part of Wages?

Dear Seniors, should we consider Conveyance allowance as part of wages for ESIC contribution calculation purposes? Please clarify.

Regards

Conveyance Allowance as Wages

Fixed conveyance allowance flowing out of a wage settlement should be treated as wages for all purposes with effect from 01.04.2002.

However, the following should not be treated as wages under section 2(22) of the E.S.I Act and also for the purpose of deciding the coverage of an employee under section 2(9) of the Act:

- Amount towards conveyance paid or reimbursed to any employee for incurring expenses for a specific duty-related journey.
- Reimbursement of the actual cost of conveyance for coming to work and going from work on production of a ticket or season ticket to prove actual expenditure.
- Payment of a certain amount for the maintenance of a vehicle depending upon the cadre of the official and category of the vehicle, subject to the production of records for actually maintaining the vehicles.
- Fixed conveyance allowance paid at an interval exceeding two months, unless such payment is made as per the contract of service or agreement.

Payment of conveyance allowance on a uniform basis, regardless of whether the employee concerned has or has not incurred any expenditure on his journey to the place of his work and back home, is part of "wages" (Karnataka High Court in the case of M/s Rajashree Cement and others v. ESIC 2004 LIC.2244; 2004(102) FLR.836).

Regards,
Suresh

I endorse Suresh Ji one hundred percent and provide further inputs as follows:

Reference: HQ instruction No. T-11/13/53/08/2001-Ins IV dated 21.11.01 & 21.03.02. This decision was based on conflicting judgments by some High Courts, which necessitated the review of earlier instructions dated 27.01.97 & 06.11.2000 wherein conveyance allowance was not considered wages.

Please correct me if I am wrong, but according to my perception, if we include a fixed amount as conveyance allowance in an employee's salary, then it should be considered as wages in the calculation of ESIC. We provide Rs. 800/- as a conveyance allowance to all our employees on a monthly basis, and since it is a fixed monthly amount, I believe it should be factored into the ESI calculation.

Thanks

Regards

Conveyance Allowance and ESIC Contribution

The conveyance allowance you are paying to your employees:

- It is not an amount towards reimbursement of expenses incurred by them for specific duty-related journeys.
- It is not a reimbursement of the actual cost of conveyance for commuting to and from work, on the production of a ticket or season ticket to prove actual expenditure.
- It is not a payment of a certain amount for the maintenance of a vehicle, depending on the cadre of the official and category of the vehicle, and subject to the production of records for actually maintaining the vehicles.
- It is not a fixed conveyance allowance paid at an interval exceeding two months.

However, it is a fixed conveyance allowance paid every month. The ESI will apply to this amount.

Regards

Even if it is a fixed amount monthly, if you are taking proof of expenditure (up to the limit fixed for the month, and if the receipts of any employee are, let's say, Rs. 750/-, then he should be given 750 only and not 800. I hope you get the point). In such cases, it is not covered under ESI as part of wages because it is primarily reimbursement of expenses and not a fixed amount given irrespective of how it is used by the employee. If you are not collecting proof of expenditure, then it is covered as wages under ESI.