Dear seniors,
We have approximately 200 employees, and a few are covered under ESI. We pay monthly incentives/bonuses based on their performance. We are currently paying salary and incentives together.
(1) Case ONE: If the gross salary is 8,000 PM and the performance-linked incentive varies from 500 to 2,000 PM. Should we pay ESI contribution on 8,000 or 8,000 plus incentives? We are currently paying incentives every month but can also pay them every two months.
(2) Case TWO: If the gross salary is 14,000 PM and the incentive is 3,000 - 6,000 PM, can we show the whole earning above 15,000 and not need ESI contribution?
(3) What are the allowances on which ESI contribution is not applied, like washing allowance?
From India, Hyderabad
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1We have approximately 200 employees, and a few are covered under ESI. We pay monthly incentives/bonuses based on their performance. We are currently paying salary and incentives together.
(1) Case ONE: If the gross salary is 8,000 PM and the performance-linked incentive varies from 500 to 2,000 PM. Should we pay ESI contribution on 8,000 or 8,000 plus incentives? We are currently paying incentives every month but can also pay them every two months.
(2) Case TWO: If the gross salary is 14,000 PM and the incentive is 3,000 - 6,000 PM, can we show the whole earning above 15,000 and not need ESI contribution?
(3) What are the allowances on which ESI contribution is not applied, like washing allowance?
From India, Hyderabad
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1. Sir, Performance Linked Incentive, or whether you call the same by any name viz. incentive, production incentive, Inam, attendance bonus, etc., are all wages and contribution is payable.
2. The position, in respect of your above cases, in my opinion, may be as follows:
Case One & Case Two: Contribution is required to be paid on Rs. 8000+ amount of incentive. On the basis of incentive, you can exempt any employee from ESI deduction provided that his total wages by adding incentive should exceed Rs. 15000/- per month. If during any contribution period, the total wages of the employee become less than Rs. 15000/-, then from that very month, the employee will again be coverable till the close of such contribution period even if his total wages for the next balance months in the contribution period may exceed the above coverable limit.
3. Washing Allowance is coverable as wages if the amount is paid to employees without any actual reference to the provision of liveries or uniforms. If the employees are not required to bear any specific uniforms or liveries and the amount is paid every month, in my opinion, it is definitely "wages" as defined under the said Act.
4. In case of any doubt, I will suggest you discuss the issue with the appropriate officer of ESIC to which your unit is attached viz.- Social Security Officer, or Director at the Regional Office level.
From India, Noida
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2. The position, in respect of your above cases, in my opinion, may be as follows:
Case One & Case Two: Contribution is required to be paid on Rs. 8000+ amount of incentive. On the basis of incentive, you can exempt any employee from ESI deduction provided that his total wages by adding incentive should exceed Rs. 15000/- per month. If during any contribution period, the total wages of the employee become less than Rs. 15000/-, then from that very month, the employee will again be coverable till the close of such contribution period even if his total wages for the next balance months in the contribution period may exceed the above coverable limit.
3. Washing Allowance is coverable as wages if the amount is paid to employees without any actual reference to the provision of liveries or uniforms. If the employees are not required to bear any specific uniforms or liveries and the amount is paid every month, in my opinion, it is definitely "wages" as defined under the said Act.
4. In case of any doubt, I will suggest you discuss the issue with the appropriate officer of ESIC to which your unit is attached viz.- Social Security Officer, or Director at the Regional Office level.
From India, Noida
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ESI Wages.doc