Understanding ESI Exemptions: Are Mobile and Food Allowances Included?

Dear Seniors,

I would like to know:

a) ESI exemption list
b) Is Mobile/Food allowance/reimbursement applicable for ESI or exempted?

Regards

Food/Milk/Tiffin/Lunch Allowance

Each case of payment for Food, Milk, Tiffin, and Lunch Allowance needs to be examined on its merits, depending on the following conditions under which the allowance is payable:

Tiffin/Food/Milk/Lunch Allowance paid in cash at a fixed rate, irrespective of whether the person is absent or on authorized leave, etc., may be treated as wages.

Tiffin/Food/Milk/Lunch Allowance paid in cash with a deduction for leave or absence, etc., may not be treated as wages.

Tiffin/Food/Milk/Lunch Allowance paid in kind, i.e., canteen subsidy/food subsidy, etc., may not be treated as wages.

For which reimbursement and exemption list are you referring to? Please clarify.

Regards, Amit

We wish to provide employees with Rs. 500 as a mobile allowance and Rs. 3500 as a food allowance per month.

Should we refer to it as an allowance or reimbursement to avoid attracting ESI?

As per ESIC Act 1948

“Wages” means all remuneration paid or payable in cash to an employee if the terms of the contract of employment, express or implied, were fulfilled and includes:

1. Any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or layoff and other additional remuneration, if any,
2. Paid at intervals not exceeding two months,

But does not include:

(a) Any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) Any travelling allowance or the value of any travelling concession;
(c) Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(d) Any gratuity payable on discharge.

As you know, ESIC contribution is payable on gross wages earned by employees. If you are going to pay a fixed mobile allowance per month, then it comes under gross earned, and its contribution will be payable under the ESIC Act.

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.

Regards,
Amit