Fixed Incentives as Part of Wages
Fixed incentives paid monthly shall be treated as part of wages. Even if they are based on results such as units produced or units sold, they will be treated as 'piece rate wages'. In the case of PF, any component of salary over and above Rs 15,000 will be out of the scope of wages for contribution purposes. It is very rare that workers work on a salary less than Rs 15,000. However, in the case of ESI, since incentives paid monthly are within the scope of wages, it is difficult to avoid unless an arrangement is made for the payment of incentives once every three months as a separate payment.
Challenges with Quarterly Incentive Payments
Now, considering a scenario where the incentive is paid once every three months, employees may raise grievances as their payslips will not show the amount as regular pay. This becomes an issue when they seek financial assistance from a bank, as the bank typically considers only the monthly salary of the customer and does not take into account any 'occasional receipts' of the customer. If this concern is raised by the workers, it is advisable to make the incentive payable once every three months.