Understanding ESIC Deductions: Should Incentives Be Included in Gross Salary?

Clarification on ESIC Deduction for Gross Salary

I need clarity regarding the Gross salary (Salary Component) calculation for ESIC deduction. If the incentive is not a regular income, will ESIC be deducted on the Gross (including Incentive) on a regular basis, or do we have to exempt the Incentive component for ESIC calculation? Are there any salary components that can be exempted from the salary calculation? I have come to know that washing allowance and uniform allowance are exempted from ESIC calculation.

Request you to provide your input regarding the same, and any document related to the same will be very helpful to me.

Regards

Supreme Court Decision on Remuneration and ESIC Contribution

As per the decision of the Supreme Court delivered on 8.3.2000 in the case of M/s. Whirlpool India Ltd. vs. ESIC in civil appeal No. 1903 of 2000, additional remuneration to become wages has to be paid at intervals not exceeding two months, as distinguished from being payable. Thus, there has to be actual payment, and the payment of production incentive does not fall under either the first part or the last part of the definition of the term wages as defined in Sec. 2(22) of the Act. Hence, no contribution is payable on the incentive bonus, provided the periodicity of payment is more than 2 months.

(Earlier instructions were issued by this office vide Memo No. T-11/13/53/19-84-Ins.IV dated 19.9.84, Memo No. Ins.III-2(2)/2/69 dated 26.12.73, Memo No. T-11/13/54/18/82-Ins.IV dated 14.7.82, and Memo No. D/Ins.5(5)/68 dated 18.9.88.)