ESIC Contribution Dilemma: Should Monthly Bonuses Be Included in Calculations?

ESIC Contribution and Monthly Bonuses

If any firm or company pays bonuses to its employees on a monthly basis along with the salary, should the gross amount for calculating ESIC contribution include or exclude the bonus amount?

Regards,
Rakesh Gupta

Bonus paid to employees could not be treated as wages for the purpose of charging contributions under Sec. 2(22), provided the periodicity of the payment is more than two months. The issue was also considered in the meeting of the ESI Corporation held on 19.12.1968, and the Corporation agreed to the recommendations of the Standing Committee that a bonus may not be treated as a wage. Hence, no contribution is payable on an annual bonus.

Thanks

The types of bonuses, namely production bonuses or incentive bonuses, that are paid monthly are considered wages. Contributions on these wages are payable under the said Act.

Most of the time, organizations pay certain incentives or different kinds of bonuses apart from fixed wages, which are excluded from ESIC contributions.

Could you please provide me with some examples of "certain incentives or different kinds of bonuses" as mentioned by you in the above remarks? These incentives or bonuses should not be considered as part of wages under the ESI Act, 1948.

Thank you.
Regards,
Maheshji

Dear All, thank you for replying to my question. However, the main issue is that the bonus amount is not a production bonus or any incentive bonus. This is the annual bonus amount that can be paid on a monthly basis.

Regards,
Rakesh

Please let the forum know if this bonus is a part of CTC or as per the Bonus Act. If the bonus, as part of CTC/Gross Salary, which is paid on a monthly basis, is termed as wages/salary by the ESIC personnel, then it is liable for contribution. This is my view; please wait for other seniors to respond.

By virtue of the provisions contained in Section 2(22) of the ESI Act, 1948, if any amount is paid at intervals not exceeding two months, then the same is considered wages, and contributions are payable under the said Act regardless of the name of the allowance.

Annual Bonus and the Payment of Bonus Act, 1965

Annual Bonus is paid in accordance with the provisions of the Payment of Bonus Act, 1965, and calculations are based on the figures of accounts of a unit in an accounting year.

As an HR professional, the member can refer the matter to ESIC with full details of the said Allowance, also indicating how the same is calculated and paid. They can request ESIC to exempt their unit from paying contributions on such so-called annual bonus, which is actually reported as being paid monthly.

Please let me know if you need further assistance.

Best regards

I agree with Harsh. If any amount is paid on a monthly basis to employees, whether it is a bonus or leave encashment, etc., then ESIC should be deducted from those salary components.

Secondly, if the bonus is paid annually, then ESIC will not be deducted.

Hi all, the maximum amount under ESIC is 15,000. However, my query is if the employee is receiving a salary of 20,000, including all the OT amounts, how should we pay ESIC?

Apart from the fixed component of the salary, every amount paid as an extra under any component shall attract ESIC. Only the statutory bonus shall not be applicable for ESIC.

Regards,
Tushar Swar

Hi Rakesh, First of all, I would like to inform you that all emoluments paid on a monthly basis will be considered for ESIC contribution up to Rs. 15,000. In the case of bonuses, all types of bonuses, apart from statutory bonuses, will be considered for ESIC contribution if the company is paying bonuses on a monthly basis.

Regards, Sunil Sharma

Sir, I have a monthly fixed salary of rupees 13700, but apart from that, I receive 25,000-30,000 rupees as a sales incentive. My question is, am I eligible to be a member of ESI?

Dear Raj,

What is your gross salary per month on your payslip? Secondly, are the incentives shown in your salary slip? Is it a monthly affair? Please elaborate so as to provide an appropriate view.