Is ESIC Deduction Applicable on Conveyance Allowance? Seeking Guidance and Notifications

Dear Seniors, please let me know if the employer should deduct the ESIC on Conveyance Allowance (part of the salary) or not. If yes, please share any notification on the same.

ESI on Gross Salary

The ESI will be on gross as per the ESIC Act 1948, which includes all allowances.

Regards

The Conveyance Allowance paid regularly without consideration of any actual expenses is a part of wages under section 2(22) of the Employees' State Insurance Act, 1948, and contribution on the same is payable as a part of wages.

However, Conveyance Charges on an actual basis paid separately (viz. by vouchers) in order to defray special expenses incurred for any travel/journey is not part of wages, and no contribution on the same, in my opinion, is payable.

There appears to be no separate notification for the same since it is laid down in the above Act. However, in case of any doubt, I suggest you take up the matter with the appropriate Regional/Sub-Regional Office of ESIC in your area indicating your ESI Code No. as well.

Regards;

Judicial Rulings on Conveyance Allowance and Wages

The Hon'ble Supreme Court in ESIC, Madras v. Sundaram Clayton Ltd (Mopeds Division), reported in 2004 (1) LLN 630, held that conveyance allowance shall not form part of wages. The Madras High Court also categorically ruled out in its latest judgment in W.A. 936 of 2011, decided on 30.6.2011 (ESIC Chennai v. Cosmopolitan Club), that conveyance allowance shall not form part of wages. The exclusion clause in Sec. 2(22) of the ESI Act clearly excludes any traveling allowance or the value of any traveling concession. Despite the above judicial ratio, the ESIC, taking advantage of an earlier Karnataka High Court judgment, is including conveyance allowance/traveling allowance as wages.

Regards,
S. Sankaralingam

Retd. Sr. Dy. Director, ESIC
Advocate & Labour Law Advisor

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