Hello Priya,
I broadly agree with the two replies on the subject. Under the ESI Act, there is no difference between skilled and unskilled, casual or regular, etc. All employees, employed even for a single day, and whatever nomenclature and status given to him are to be covered if remuneration paid in cash is Rs 10,000 or below (excluding OT, which is to be taken only for paying contribution, and not for deciding coverage). All payments paid in cash are to be considered, but anything paid in kind need not be taken. As for HR allowance, if payment of rent is made by the Company directly to the house owner, though taken for an employee, need not be taken. Similarly, reimbursement of actual conveyance or transportation expenses need not be taken. Further production and productivity incentives and such payments made in a periodicity of more than two months need not be taken to pay contribution.
Please also remember, the benefits available to an employee covered under the ESI scheme, in cash (for leave, maternity, accident-related disability, etc.), will also be based on the wage on which the contribution is paid, and since benefit rates have been revised upward, your employee will stand to benefit depending on the actual rate of contribution paid. However, for medical care, the rate of contribution paid will not make any difference since all are treated equally for medical care.
Instead of bothering about the nomenclature of different components of gross wage, just remember "anything paid in cash in consideration of a contract for employment is wage, anything paid in kind or paid additional to contractual obligation in a periodicity of over two months is not wage, and reimbursement of specific purposes like washing allowance and actual conveyance is not wage".
The ESI Corporation Headquarters in Delhi has been issuing specific instructions on the subject based on court judgments. Often, the field officers and Inspectors may not be aware of the instructions and policy stand of their department, and will seek contribution on wages not legally correct. Please use the Right to Information Act to seek copies of policy instructions from ESIC HQ New Delhi.
O. Abdul Hameed
Formerly Additional Commissioner ESIC
oahamid@yahoo.com