ESI on Earned Leave Encashment: Do We Need to Pay Monthly Like Bonus?

kilarumeher
ESI Payment on Earned Leave Encashment

ESI needs to be paid on monthly Earned Leave encashment. When we are paying ESI on Bonus or any monthly earnings, do we need to pay on EL also?

Regards
ravi5554
ESI should not be deducted on leave encashment and bonus as per the act. Bonus paid to employees could not be treated as wages for the purpose of charging of contribution under Sec. 2(22).

Items Not Considerable for ESI Deductions

The following items will not form part of the wage either under Section 2(9) or under Section 2(22) of the ESI Act:
- Payment made on account of un-availed leave at the time of discharge.
- Commission on advertisement secured for newspapers, if not paid to the regular employee.
- Fuel allowance/Petrol allowance.
- Entertainment allowance.
- Shoes allowance.
- Payment made on account of gratuity on discharge/retirement.
- Payment made on encashment of leave.
Harsh Kumar Mehta
Fuel allowance/Petrol allowance, Entertainment allowance, and Shoes allowance, if paid every month as wage components, are considered wages under the ESI Act, 1948, and contributions on these wages are payable under the said Act. Shri Ravi5554 is requested to kindly disclose the details or instructions/decisions of honorable courts on the basis of which it is opined that "Fuel allowance/Petrol allowance, Entertainment allowance, Shoes allowance" are not wages. This is important so that I may be able to correct my view accordingly.

There are many types of bonuses, such as attendance bonus, production bonus, etc., which, if paid and payable every month as per the terms and conditions of employment, are all considered wages under the said Act, and contributions are payable. Only yearly bonuses are not coverable as wages under the said Act. I hope Shri Ravi5554 will clarify what type of "bonus" he has mentioned as cannot be treated as wages so that proper actions can be taken regarding compliance under the above Act and rules/regulations framed thereunder.

Regards
ravi5554
If an employee receives a monthly bonus, incentive, or overtime in their salary, then the ESI contribution can be deducted from the employee's salary.
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