Hi, Let us post our discussions, queries & clarifications and share our knowledge on ESI ...... YOUR CONTRIBUTIONS ON THE TOPIC ARE INVITED & HIGHLY APPRECIATED... Regards CRK crk.mbahr@yahoo.com
From India, Vijayawada
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82From India, Vijayawada
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The Employees' State Insurance Act, 1948 is a piece of social welfare legislation enacted primarily with the object of providing certain benefits to employees in case of sickness, maternity, and employment injury, and also to make provisions for certain other matters incidental thereto.
The Act, in fact, tries to attain the goal of socio-economic justice enshrined in the Directive Principles of State Policy under Part IV of the Constitution, in particular, articles 41, 42, and 43, which enjoin the State to make effective provision for securing the right to work, to education and public assistance in cases of unemployment, old age, sickness, and disablement, and in other cases of any undeserved want to make provision for securing just and human conditions of work, and maternity relief and to secure by suitable legislation or economic organization or in any other way, to all workers, work, a living wage, a decent standard of life, and full enjoyment of leisure and social and cultural activities. The Act strives to materialize these avowed objects though only to a limited extent. Broadly, the benefits provided by the Act to insured persons or their dependants are:
(i) periodical payment in case of sickness of the insured person (sickness benefit);
(ii) periodical payment to an insured woman in case of confinement or miscarriage or sickness arising out of pregnancy, confinement, the premature birth of a child, or miscarriage (maternity benefit);
(iii) periodical payment to an insured person suffering from disablement as a result of an employment injury (disablement benefit);
(iv) periodical payment to dependants of an insured person who dies as a result of an employment injury (dependant's benefit);
(v) medical treatment for and attendance on the insured person (medical benefit), and
(vi) payment for expenditure on the funeral of the insured person (funeral expenses).
Here employment injury includes occupational diseases, and disablement may either be temporary or permanent, whether total or partial.
This Act covers a wider spectrum than the Factories Act in the sense that while the Factories Act concerns the health, safety, welfare, leave, etc., of the workers employed in the factory premises only, the benefits of this Act extend to employees whether working inside the factory or establishment or elsewhere or they are directly employed or employed by the principal employer or through an intermediate agency if the employment is incidental or in connection with the work in the factory or establishment, meaning thereby, under the Act, it is not the place of work but the nexus between the work and the factory or establishment to which the Act is extended is material.
Extensive regulations have been framed under the Act to identify the employees who would be entitled to the benefits. The employees are to be registered and their contribution cards and identity cards are to be prepared.
An employee, therefore, has to be identified in the records of the Employees' State Insurance Corporation so that he is entitled to claim various benefits. An elaborate machinery is provided for the effective administration of the Act, the apex body being the ESI Corporation, subordinate to which are the Standing Committee and Medical Benefit Council. The Corporation is a public corporation controlled and subsidized by the government for the benefit of the employees, its object being rendering service to a penurious section of the public. The funds required for the functioning of the scheme are raised from contributions, both of employers and employees, grants, donations, and gifts from governments, local bodies, individuals, or bodies whether corporate or not (ESI Fund). For adjudication of disputes and claims, Employees Insurance Courts are being created. Provision for the recovery of contribution, penalty, and damages for default, prosecution, and punishment, etc., have also been provided.
The ever-expanding industrial horizon and reciprocal uprising of labor consciousness necessitate the employer and employee to be conversant with the current labor legislations that govern their relationship, rights, and obligations.
YOUR CONTRIBUTIONS ON THE TOPIC ARE HIGHLY APPRECIATED...
Regards
CRK
From India, Vijayawada
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The Act, in fact, tries to attain the goal of socio-economic justice enshrined in the Directive Principles of State Policy under Part IV of the Constitution, in particular, articles 41, 42, and 43, which enjoin the State to make effective provision for securing the right to work, to education and public assistance in cases of unemployment, old age, sickness, and disablement, and in other cases of any undeserved want to make provision for securing just and human conditions of work, and maternity relief and to secure by suitable legislation or economic organization or in any other way, to all workers, work, a living wage, a decent standard of life, and full enjoyment of leisure and social and cultural activities. The Act strives to materialize these avowed objects though only to a limited extent. Broadly, the benefits provided by the Act to insured persons or their dependants are:
(i) periodical payment in case of sickness of the insured person (sickness benefit);
(ii) periodical payment to an insured woman in case of confinement or miscarriage or sickness arising out of pregnancy, confinement, the premature birth of a child, or miscarriage (maternity benefit);
(iii) periodical payment to an insured person suffering from disablement as a result of an employment injury (disablement benefit);
(iv) periodical payment to dependants of an insured person who dies as a result of an employment injury (dependant's benefit);
(v) medical treatment for and attendance on the insured person (medical benefit), and
(vi) payment for expenditure on the funeral of the insured person (funeral expenses).
Here employment injury includes occupational diseases, and disablement may either be temporary or permanent, whether total or partial.
This Act covers a wider spectrum than the Factories Act in the sense that while the Factories Act concerns the health, safety, welfare, leave, etc., of the workers employed in the factory premises only, the benefits of this Act extend to employees whether working inside the factory or establishment or elsewhere or they are directly employed or employed by the principal employer or through an intermediate agency if the employment is incidental or in connection with the work in the factory or establishment, meaning thereby, under the Act, it is not the place of work but the nexus between the work and the factory or establishment to which the Act is extended is material.
Extensive regulations have been framed under the Act to identify the employees who would be entitled to the benefits. The employees are to be registered and their contribution cards and identity cards are to be prepared.
An employee, therefore, has to be identified in the records of the Employees' State Insurance Corporation so that he is entitled to claim various benefits. An elaborate machinery is provided for the effective administration of the Act, the apex body being the ESI Corporation, subordinate to which are the Standing Committee and Medical Benefit Council. The Corporation is a public corporation controlled and subsidized by the government for the benefit of the employees, its object being rendering service to a penurious section of the public. The funds required for the functioning of the scheme are raised from contributions, both of employers and employees, grants, donations, and gifts from governments, local bodies, individuals, or bodies whether corporate or not (ESI Fund). For adjudication of disputes and claims, Employees Insurance Courts are being created. Provision for the recovery of contribution, penalty, and damages for default, prosecution, and punishment, etc., have also been provided.
The ever-expanding industrial horizon and reciprocal uprising of labor consciousness necessitate the employer and employee to be conversant with the current labor legislations that govern their relationship, rights, and obligations.
YOUR CONTRIBUTIONS ON THE TOPIC ARE HIGHLY APPRECIATED...
Regards
CRK
From India, Vijayawada
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Some information on ESI -
--> In addition to necessities of food, clothing, housing etc., man needs security in times of physical and economic distress consequent upon sickness, disablement etc. The Employees’ State Insurance Scheme is an integrated measure of Social Insurance embodied in the Employees’ State Insurance Act and is designed to accomplish the task of protecting ‘employees’ as defined in the Employees’ State Insurance Act against the hazards of sickness, maternity, disablement and death due to employment injury and to provide medical care to insured persons and their families. The Scheme covers employees of non-seasonal power-using factories employing 10 or more persons. There is, however, a built-in provision for its extension to other establishments or classes of establishments, industrial, commercial, agricultural or otherwise. The Scheme has been progressively extended to cover employees in non-power using factories employing 20 or more persons and to commercial establishments.
--> The Employees’ State Insurance Scheme is administered by a corporate body called the Employees’ State Insurance Corporation (ESIC), which has members representing Employees, Employers, the Central Government, State Governments, Medical Profession and the Parliament. The Director General is the Chief Executive Officer of the Corporation and is also an ex-officio member of the Corporation. The other bodies at the national level are the Standing Committee (a representative body of the Corporation) and the Medical Benefit Council, a specialized body which advises the Corporation on administration of Medical Benefit. At the Regional and Local levels, the Regional Boards and Local Committees have been constituted. There is, thus, an association of interests and interest groups at all levels.
ESIC is the trustee of the interests of the insured persons. It discharges its obligations and duties through a network of Regional Offices and Local Offices, Hospitals and Dispensaries spread over the entire country.
--> The Employees’ State Insurance Funds are primarily built out of employers contribution and employees contribution payable monthly as a fixed percentage of wages.
--> The Contribution is deposited by the Employer in cash or by cheque at the designated branches of some nationalized banks. The responsibility for payment of all contributions is that of the employer with a right to deduct the Employees’ share of contributions from employees’ wages relating to the period in respect of which the Contribution is payable.
--> Workers, covered under the ESI Act, are required to pay contribution towards the scheme on a monthly basis. A contribution period means a six-month time span from 1st April to 30th September and 1st October to 31st March. Thus, in a financial year there are two contribution periods of six months duration.
Cash benefits under the scheme are generally linked with contributions paid. The benefit period starts three months after the closure of a contribution period. The two types of periods are illucidated below: –
1st October to 31st March 1st July to 31st December
--> A network of Local Offices has been established by the Corporation in all implemented areas to disburse all claims for sickness, maternity, disablement and dependents’ benefit. The Local Office also answers all doubts and enquiries and assists otherwise in filling in claim forms and completing other action necessary in connection with the settlement of claims. These offices also interact with the employers of the area. The Local Offices are managed by a Manager and work under the direction and control of the Regional Offices.
--> The contribution condition required to be fulfilled for admissibility of sickness benefit during any benefit period is that contributions should have been paid in respect of an insured person in the corresponding contribution period for not less than 78 days.
--> Extended Sickness Benefit is a Cash Benefit paid for prolonged illness due to any of the 34 specified diseases as mentioned below.
Diseases
1. Tuberculosis
2. Leprosy
3. Chronic Emphysema
4. Bronchiectasis
5. Interstitial Lung disease
6. AIDS
7. Malignant Diseases
8. Diabetes Mellitus-with proliferate retinopathy/diabetic foot/ nephropathy.
9. Monoplegia
10. Hemiplegia
11. Paraplegia
12. Hemiparesis
13. Intracranial space occupying lesion
14. Spinal Cord Compression
15. Parkinson’s disease
16. Myasthenia Gravis/Neuromuscular Dystrophies
17. Immature Cataract with vision 6/60 or less
18. Detachment of Retina
19. Glaucoma
20. Coronary Artery Diseases
21. Congestive Heart Failure-Left, Right
22. Cardiac valvular Diseases with failure/complications
23. Cardiomyopathies
24. Heat disease with surgical intervention along with complications
25. Chronic Obstructive Long diseases (COPD) with congestive heart failure (Cor Pulmonale)
26. Cirrhosis of liver with ascitis/chronic active hepatitis (“CAH”)
27. Dislocation of vertebra/prolapse of intervertebral disc
28. Non union or delayed union of fracture
29. Post Traumatic surgical amputation of lower extremity
30. Compound fracture with chronic osteomyelitis
31. (a) Schizophrenia
(b)Endogenous depression
(c)Maniac Depressive Psychosis (MDP)
(d)Dementia
32.More than 20% Burns with infection/complication
33.Chronic Renal Failure
34.Reynaud’s disease/Burger’s disease.
In addition, extended sickness benefit may also be sanctioned by the prescribed authority, in case of any rare disease or special circumstances on the recommendation of the specified authority.
--> Except in case of disability from administration of drugs/injections, the insured person should have been in continuous employment for a period of 2 years and should have contributed for at least 156 days in 4 preceding contribution periods.
--> The daily rate of Extended Sickness Benefit is 40% more than the Standard Sickness Benefit rate admissible
Regards
CRK
From India, Vijayawada
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--> In addition to necessities of food, clothing, housing etc., man needs security in times of physical and economic distress consequent upon sickness, disablement etc. The Employees’ State Insurance Scheme is an integrated measure of Social Insurance embodied in the Employees’ State Insurance Act and is designed to accomplish the task of protecting ‘employees’ as defined in the Employees’ State Insurance Act against the hazards of sickness, maternity, disablement and death due to employment injury and to provide medical care to insured persons and their families. The Scheme covers employees of non-seasonal power-using factories employing 10 or more persons. There is, however, a built-in provision for its extension to other establishments or classes of establishments, industrial, commercial, agricultural or otherwise. The Scheme has been progressively extended to cover employees in non-power using factories employing 20 or more persons and to commercial establishments.
--> The Employees’ State Insurance Scheme is administered by a corporate body called the Employees’ State Insurance Corporation (ESIC), which has members representing Employees, Employers, the Central Government, State Governments, Medical Profession and the Parliament. The Director General is the Chief Executive Officer of the Corporation and is also an ex-officio member of the Corporation. The other bodies at the national level are the Standing Committee (a representative body of the Corporation) and the Medical Benefit Council, a specialized body which advises the Corporation on administration of Medical Benefit. At the Regional and Local levels, the Regional Boards and Local Committees have been constituted. There is, thus, an association of interests and interest groups at all levels.
ESIC is the trustee of the interests of the insured persons. It discharges its obligations and duties through a network of Regional Offices and Local Offices, Hospitals and Dispensaries spread over the entire country.
--> The Employees’ State Insurance Funds are primarily built out of employers contribution and employees contribution payable monthly as a fixed percentage of wages.
--> The Contribution is deposited by the Employer in cash or by cheque at the designated branches of some nationalized banks. The responsibility for payment of all contributions is that of the employer with a right to deduct the Employees’ share of contributions from employees’ wages relating to the period in respect of which the Contribution is payable.
--> Workers, covered under the ESI Act, are required to pay contribution towards the scheme on a monthly basis. A contribution period means a six-month time span from 1st April to 30th September and 1st October to 31st March. Thus, in a financial year there are two contribution periods of six months duration.
Cash benefits under the scheme are generally linked with contributions paid. The benefit period starts three months after the closure of a contribution period. The two types of periods are illucidated below: –
1st October to 31st March 1st July to 31st December
--> A network of Local Offices has been established by the Corporation in all implemented areas to disburse all claims for sickness, maternity, disablement and dependents’ benefit. The Local Office also answers all doubts and enquiries and assists otherwise in filling in claim forms and completing other action necessary in connection with the settlement of claims. These offices also interact with the employers of the area. The Local Offices are managed by a Manager and work under the direction and control of the Regional Offices.
--> The contribution condition required to be fulfilled for admissibility of sickness benefit during any benefit period is that contributions should have been paid in respect of an insured person in the corresponding contribution period for not less than 78 days.
--> Extended Sickness Benefit is a Cash Benefit paid for prolonged illness due to any of the 34 specified diseases as mentioned below.
Diseases
1. Tuberculosis
2. Leprosy
3. Chronic Emphysema
4. Bronchiectasis
5. Interstitial Lung disease
6. AIDS
7. Malignant Diseases
8. Diabetes Mellitus-with proliferate retinopathy/diabetic foot/ nephropathy.
9. Monoplegia
10. Hemiplegia
11. Paraplegia
12. Hemiparesis
13. Intracranial space occupying lesion
14. Spinal Cord Compression
15. Parkinson’s disease
16. Myasthenia Gravis/Neuromuscular Dystrophies
17. Immature Cataract with vision 6/60 or less
18. Detachment of Retina
19. Glaucoma
20. Coronary Artery Diseases
21. Congestive Heart Failure-Left, Right
22. Cardiac valvular Diseases with failure/complications
23. Cardiomyopathies
24. Heat disease with surgical intervention along with complications
25. Chronic Obstructive Long diseases (COPD) with congestive heart failure (Cor Pulmonale)
26. Cirrhosis of liver with ascitis/chronic active hepatitis (“CAH”)
27. Dislocation of vertebra/prolapse of intervertebral disc
28. Non union or delayed union of fracture
29. Post Traumatic surgical amputation of lower extremity
30. Compound fracture with chronic osteomyelitis
31. (a) Schizophrenia
(b)Endogenous depression
(c)Maniac Depressive Psychosis (MDP)
(d)Dementia
32.More than 20% Burns with infection/complication
33.Chronic Renal Failure
34.Reynaud’s disease/Burger’s disease.
In addition, extended sickness benefit may also be sanctioned by the prescribed authority, in case of any rare disease or special circumstances on the recommendation of the specified authority.
--> Except in case of disability from administration of drugs/injections, the insured person should have been in continuous employment for a period of 2 years and should have contributed for at least 156 days in 4 preceding contribution periods.
--> The daily rate of Extended Sickness Benefit is 40% more than the Standard Sickness Benefit rate admissible
Regards
CRK
From India, Vijayawada
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Your postings are highly appreciable. I am quite happy to see you having such good information about ESI. Keep on sharing the knowledge.
Don't be disappointed by no response; nowadays, many people are misusing this forum without contributing.
In addition to the information you shared, the main change in ESI in the next few months is that it's going to be fully computerized for better service to its stakeholders. For Insured Persons, ESIC is providing a smart card to the employee and their family to access any dispensary or hospital throughout India. Employers will be allowed to submit their returns and forms online.
Furthermore, the dream of poor workers is coming to reality - seeing their kids become doctors with admission to ESI established Medical Institutions.
Best wishes.
From India, Hyderabad
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Don't be disappointed by no response; nowadays, many people are misusing this forum without contributing.
In addition to the information you shared, the main change in ESI in the next few months is that it's going to be fully computerized for better service to its stakeholders. For Insured Persons, ESIC is providing a smart card to the employee and their family to access any dispensary or hospital throughout India. Employers will be allowed to submit their returns and forms online.
Furthermore, the dream of poor workers is coming to reality - seeing their kids become doctors with admission to ESI established Medical Institutions.
Best wishes.
From India, Hyderabad
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Hi, everybody!
Very good and useful information furnished by Mr. CRk. But it's quite surprising that nobody had responded to it. I request all of you to kindly participate actively in the discussion and share your knowledge with others. You may kindly post your doubts, clarifications required, or procedural aspects and latest developments/amendments about ESI. Let us help each other in knowing more about ESI so that the employers know their obligations and employees covered under the scheme understand the benefits admissible to them, to make it more meaningful to achieve its object.
K.V. Ramana Murty, Deputy Director (Rtd.), ESIC, Hyderabad
From India, Hyderabad
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Very good and useful information furnished by Mr. CRk. But it's quite surprising that nobody had responded to it. I request all of you to kindly participate actively in the discussion and share your knowledge with others. You may kindly post your doubts, clarifications required, or procedural aspects and latest developments/amendments about ESI. Let us help each other in knowing more about ESI so that the employers know their obligations and employees covered under the scheme understand the benefits admissible to them, to make it more meaningful to achieve its object.
K.V. Ramana Murty, Deputy Director (Rtd.), ESIC, Hyderabad
From India, Hyderabad
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Dear Seniors,
I had earlier posted a question on ESI contributions in which I had some doubts. My query is whether an advance bonus and ex-gratia that an X company pays to its employees as part of the salary can attract ESI contributions, or if, like the washing allowance, an exemption is given to this component.
Regards,
Mohan
From India, Mumbai
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I had earlier posted a question on ESI contributions in which I had some doubts. My query is whether an advance bonus and ex-gratia that an X company pays to its employees as part of the salary can attract ESI contributions, or if, like the washing allowance, an exemption is given to this component.
Regards,
Mohan
From India, Mumbai
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For the benefit of all the members connected with ESI, I am giving below a detailed explanation about the wages and its interpretation. Suggestions and further discussion are welcome.
The term 'wages' under Section 2(22) of the ESI Act has been divided into four parts as follows:
1. All remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled;
2. and includes any payment to an employee in respect of any period of authorized leave, lockout, strike which is not illegal or lay off;
3. and other additional remuneration, if any paid at intervals not exceeding two months;
4. but does not include:-
a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
b) any traveling allowance or the value of any travel concession;
c) any sum paid to the person employed to defray the special expenses entitled to him by the nature of his employment; or
d) any gratuity payable on discharge.
Each part is explained below.
Part I
1. The remuneration must be in 'cash' and not in 'kind'.
2. It need not necessarily be paid. It is sufficient that it is accrued and payable. An employee may leave the employment in the middle of a month without receiving his wages for the period he worked. Though the salary was not paid to him, contribution is due on it as the salary has accrued to him and is payable.
3. There is no periodicity or duration. Salary paid once in a quarter or annually is also thus wages.
4. The remuneration must be in terms of the contract of employment. It may be oral or written. Thus, an offer of appointment specifying the nature of the job and quantum of wages admissible to an employee or an agreement between the employer and the employees' union/Association, whether orally agreed to or reduced to writing can be termed as the contract of employment. The standard rules of the company regulating the pay structure and other fringe benefits binding on the employee are also a contract of employment. Normally, the following items come under this category.
a) Basic Pay, Wages, Salary;
b) D.A./HRA/CCA/Overtime/officiating allowance/Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance/Education allowance/Food & Tea allowance/conveyance allowance etc;
c) Wages/salary/pay for weekly off and public holidays;
d) Commission paid to sales staff;
e) Subsistence allowance paid to an employee during the period of suspension;
f) Attendance Bonus or incentive or ex gratia in lieu of Attendance Bonus or production incentive;
g) Regular Honorarium or salary or remuneration paid to a Director;
h) Collection Batta paid to running staff.
This list is only illustrative and not exhaustive.
Part II:
The second category includes any payment actually made for:
a) Authorized Leave, b) Lock-out, c) Lay-off, and d) Legal strike.
Thus, in the case of 'salary', contribution is due even though the salary is not actually disbursed to the employee. But, in the case of 'leave salary' or any other items of wages shown above, contribution becomes due only when it is actually paid to the employee and not otherwise.
In a case where an employee worked for the first 15 days of a month and proceeded on authorized leave for the remaining 15 days. But he did not return back and left the service, without receiving the wages for that month. In this case, the first 15 days fall under the first category. Therefore contribution is payable even though 'salary' was not disbursed to the employee. No contribution needs to be paid on the leave wages for the second 15 days, as the leave salary was actually not disbursed to the employee. Contribution is due on the leave wages as and when it is actually disbursed to the employee.
Lay-off compensation might have been paid to an employee after the lay-off is lifted or after a considerable time. The contribution is then payable within 21 days of the expiry of the calendar month in which the lay-off compensation has actually been disbursed to the employee. Similar is the case with wages for the strike period.
Part III:
This part deals with 'any additional remuneration' that is not covered under part I and II, and also not covered by any service condition or terms of the contract of employment. This additional remuneration must also be actually paid, and the duration between each such payment should not exceed 'two months'. Normally, no payment is termed as additional remuneration which is not forming part of the service condition or without inclusion in the terms of the contract of employment. Where the employer pays this kind of remuneration on his own will and pleasure without any 'right' on the part of the employee to claim its continuance or regular payment, and the employer has the 'right' to withdraw, modify, alter, or revise the scheme of payment, comes under this category. Production incentive paid by the employer quarterly at his option, without any agreement with the employees comes under this category, and was held as 'not wages' by the Supreme Court in the case of M/s Whirlpool India Ltd. vs. ESIC in civil Appeal No. 1903 of 2000.
Part IV:
Deals with exclusions of employers' share of PF/ESI Contribution, traveling allowance, washing allowance, gratuity, etc.
The following items are treated as 'not wages':
1. Salary drawn by the proprietor, Partners, and the contractor himself;
2. Daily allowance paid to running staff;
3. Reimbursement of the actual cost of conveyance for coming to work and going back on the production of tickets or season ticket or bus pass subject to proof of actual expenditure;
4. Washing allowance if dress is provided by the Employer;
5. Cycle allowance, if the cycle is used for official purposes;
6. Shoe allowance for polishing the shoes, if the shoe is supplied;
7. Service charges collected by the Hotel management on behalf of their employees in lieu of direct tips and the same is paid to the employees at a later date. (M/s Rambagh palace Hotel, Jaipur, vs. ESIC)
8. Annual Bonus; (But if this bonus is paid every month, it is considered as wages. In the case of Beedi establishments, 8.33 percent of wages is paid every month as a bonus, which is considered as wages)
9. Annual sales commission;
10. Payments made for Annual/periodical service contracts;
11. Commission paid to dealers/agents;
12. Payments made to Labour consultants, Lawyers, Engineers, Counsels, chartered Accountants;
13. Encashment of un-availed leave;
14. Inam or incentive paid at an interval exceeding two months in the absence of any agreement or contract and the employer has got the right to revise or withdraw it at his will;
This list is not exhaustive but only suggestive.
Why all allowances are to be included?
The cash benefits payable to an employee are always a percentage of wages he could have earned. An employee who loses his wages during his abstention from work due to sickness, disablement, etc. is expected to get cash compensation proportionate to the total wages and allowances he would have received had he been working during this period. It is, therefore, necessary to include all allowances for the purpose of wages and payment of contribution. If the contribution is confined to only basic wages, the cash benefits would be too low, to subsist the employee himself. It also tempts the employers to keep the basic wages to the barest minimum and show the balance as a package of various allowances, to avoid their share of contribution, but the employee is put to loss when he receives the cash benefit at a lower rate.
Why overtime should be included in wages for payment of contribution but not for deciding coverage of an employee?
Overtime is not a regular and continuous payment, but it is of an occasional nature. If overtime is also taken for the wage limit for the coverage of an employee, he may be going out of coverage for some time and again coming within the orbit of the scheme when overtime is not there. This frequent interruption from the scheme deprives him of the benefits admissible under the scheme even after making a payment of contribution for part of a contribution period. To ensure continued security and protection, overtime is excluded for determining the wage ceiling for the coverage of an employee. However, it is included for the payment of contribution to cover the accident risk during the period he was on overtime work, and to enable him to draw the cash benefits at an enhanced rate, as by adding overtime wages to his average daily wages, he is fitted into the next higher slab in the Standard Benefit rate table in Rule 54 for claiming cash benefits.
Why the contribution should be paid on the total wages beyond the wage ceiling limit when an employee crosses the wage limit prescribed by the Central Government? (The present limit is Rs. 15,000/- from 01-5-2010)
An employee whose wages (excluding O.T.) cross the prescribed ceiling limit in any month at any time after the commencement of the contribution period continue to be an employee till the end of that contribution period. Though there is a wage ceiling limit for the coverage of an employee, there is no ceiling limit in the definition of wages for payment of contribution. Hence contribution is payable on the total wages without any ceiling limit. As the cash benefit is regulated on the average daily wages in a contribution period, such an employee gets fitted into a higher wage slab in the standard benefit table in view of the payment of contribution on the total wages. Now, there are 99 wage groups in the standard rate table, and the maximum daily standard benefit rate is Rs. 480/ Wage period related to an employee is the period in respect of which wages are ordinarily
From India, Hyderabad
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The term 'wages' under Section 2(22) of the ESI Act has been divided into four parts as follows:
1. All remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled;
2. and includes any payment to an employee in respect of any period of authorized leave, lockout, strike which is not illegal or lay off;
3. and other additional remuneration, if any paid at intervals not exceeding two months;
4. but does not include:-
a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
b) any traveling allowance or the value of any travel concession;
c) any sum paid to the person employed to defray the special expenses entitled to him by the nature of his employment; or
d) any gratuity payable on discharge.
Each part is explained below.
Part I
1. The remuneration must be in 'cash' and not in 'kind'.
2. It need not necessarily be paid. It is sufficient that it is accrued and payable. An employee may leave the employment in the middle of a month without receiving his wages for the period he worked. Though the salary was not paid to him, contribution is due on it as the salary has accrued to him and is payable.
3. There is no periodicity or duration. Salary paid once in a quarter or annually is also thus wages.
4. The remuneration must be in terms of the contract of employment. It may be oral or written. Thus, an offer of appointment specifying the nature of the job and quantum of wages admissible to an employee or an agreement between the employer and the employees' union/Association, whether orally agreed to or reduced to writing can be termed as the contract of employment. The standard rules of the company regulating the pay structure and other fringe benefits binding on the employee are also a contract of employment. Normally, the following items come under this category.
a) Basic Pay, Wages, Salary;
b) D.A./HRA/CCA/Overtime/officiating allowance/Night shift allowance/efficiency allowance/Heat, Gas, Dust allowance/Education allowance/Food & Tea allowance/conveyance allowance etc;
c) Wages/salary/pay for weekly off and public holidays;
d) Commission paid to sales staff;
e) Subsistence allowance paid to an employee during the period of suspension;
f) Attendance Bonus or incentive or ex gratia in lieu of Attendance Bonus or production incentive;
g) Regular Honorarium or salary or remuneration paid to a Director;
h) Collection Batta paid to running staff.
This list is only illustrative and not exhaustive.
Part II:
The second category includes any payment actually made for:
a) Authorized Leave, b) Lock-out, c) Lay-off, and d) Legal strike.
Thus, in the case of 'salary', contribution is due even though the salary is not actually disbursed to the employee. But, in the case of 'leave salary' or any other items of wages shown above, contribution becomes due only when it is actually paid to the employee and not otherwise.
In a case where an employee worked for the first 15 days of a month and proceeded on authorized leave for the remaining 15 days. But he did not return back and left the service, without receiving the wages for that month. In this case, the first 15 days fall under the first category. Therefore contribution is payable even though 'salary' was not disbursed to the employee. No contribution needs to be paid on the leave wages for the second 15 days, as the leave salary was actually not disbursed to the employee. Contribution is due on the leave wages as and when it is actually disbursed to the employee.
Lay-off compensation might have been paid to an employee after the lay-off is lifted or after a considerable time. The contribution is then payable within 21 days of the expiry of the calendar month in which the lay-off compensation has actually been disbursed to the employee. Similar is the case with wages for the strike period.
Part III:
This part deals with 'any additional remuneration' that is not covered under part I and II, and also not covered by any service condition or terms of the contract of employment. This additional remuneration must also be actually paid, and the duration between each such payment should not exceed 'two months'. Normally, no payment is termed as additional remuneration which is not forming part of the service condition or without inclusion in the terms of the contract of employment. Where the employer pays this kind of remuneration on his own will and pleasure without any 'right' on the part of the employee to claim its continuance or regular payment, and the employer has the 'right' to withdraw, modify, alter, or revise the scheme of payment, comes under this category. Production incentive paid by the employer quarterly at his option, without any agreement with the employees comes under this category, and was held as 'not wages' by the Supreme Court in the case of M/s Whirlpool India Ltd. vs. ESIC in civil Appeal No. 1903 of 2000.
Part IV:
Deals with exclusions of employers' share of PF/ESI Contribution, traveling allowance, washing allowance, gratuity, etc.
The following items are treated as 'not wages':
1. Salary drawn by the proprietor, Partners, and the contractor himself;
2. Daily allowance paid to running staff;
3. Reimbursement of the actual cost of conveyance for coming to work and going back on the production of tickets or season ticket or bus pass subject to proof of actual expenditure;
4. Washing allowance if dress is provided by the Employer;
5. Cycle allowance, if the cycle is used for official purposes;
6. Shoe allowance for polishing the shoes, if the shoe is supplied;
7. Service charges collected by the Hotel management on behalf of their employees in lieu of direct tips and the same is paid to the employees at a later date. (M/s Rambagh palace Hotel, Jaipur, vs. ESIC)
8. Annual Bonus; (But if this bonus is paid every month, it is considered as wages. In the case of Beedi establishments, 8.33 percent of wages is paid every month as a bonus, which is considered as wages)
9. Annual sales commission;
10. Payments made for Annual/periodical service contracts;
11. Commission paid to dealers/agents;
12. Payments made to Labour consultants, Lawyers, Engineers, Counsels, chartered Accountants;
13. Encashment of un-availed leave;
14. Inam or incentive paid at an interval exceeding two months in the absence of any agreement or contract and the employer has got the right to revise or withdraw it at his will;
This list is not exhaustive but only suggestive.
Why all allowances are to be included?
The cash benefits payable to an employee are always a percentage of wages he could have earned. An employee who loses his wages during his abstention from work due to sickness, disablement, etc. is expected to get cash compensation proportionate to the total wages and allowances he would have received had he been working during this period. It is, therefore, necessary to include all allowances for the purpose of wages and payment of contribution. If the contribution is confined to only basic wages, the cash benefits would be too low, to subsist the employee himself. It also tempts the employers to keep the basic wages to the barest minimum and show the balance as a package of various allowances, to avoid their share of contribution, but the employee is put to loss when he receives the cash benefit at a lower rate.
Why overtime should be included in wages for payment of contribution but not for deciding coverage of an employee?
Overtime is not a regular and continuous payment, but it is of an occasional nature. If overtime is also taken for the wage limit for the coverage of an employee, he may be going out of coverage for some time and again coming within the orbit of the scheme when overtime is not there. This frequent interruption from the scheme deprives him of the benefits admissible under the scheme even after making a payment of contribution for part of a contribution period. To ensure continued security and protection, overtime is excluded for determining the wage ceiling for the coverage of an employee. However, it is included for the payment of contribution to cover the accident risk during the period he was on overtime work, and to enable him to draw the cash benefits at an enhanced rate, as by adding overtime wages to his average daily wages, he is fitted into the next higher slab in the Standard Benefit rate table in Rule 54 for claiming cash benefits.
Why the contribution should be paid on the total wages beyond the wage ceiling limit when an employee crosses the wage limit prescribed by the Central Government? (The present limit is Rs. 15,000/- from 01-5-2010)
An employee whose wages (excluding O.T.) cross the prescribed ceiling limit in any month at any time after the commencement of the contribution period continue to be an employee till the end of that contribution period. Though there is a wage ceiling limit for the coverage of an employee, there is no ceiling limit in the definition of wages for payment of contribution. Hence contribution is payable on the total wages without any ceiling limit. As the cash benefit is regulated on the average daily wages in a contribution period, such an employee gets fitted into a higher wage slab in the standard benefit table in view of the payment of contribution on the total wages. Now, there are 99 wage groups in the standard rate table, and the maximum daily standard benefit rate is Rs. 480/ Wage period related to an employee is the period in respect of which wages are ordinarily
From India, Hyderabad
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Dear Seniors,
Please share your views on the following points:
1. Once the establishment is covered, its branch office automatically comes under ESIC compliance bracket. However, in certain regions where ESIC facilities or dispensaries do not exist where the company employees are working, how can we provide benefits through this scheme to those employees? Is there any exemption for compliance?
2. Company X is registered under ESIC. The nature of work of Company X is to supply manpower to various companies across India. Company X does its compliance from the head office. It has taken a sub-code where manpower is supplied. However, in some districts, it has not taken a sub-code and is sending a copy of RC half-yearly regularly to those districts without obtaining the sub-code number for the employees working there. The insurance numbers are obtained from the adjacent district.
My question is: Can Company X's employees who are deployed in those districts avail the ESIC benefits if the IP Insurance Number is obtained from the adjacent district's ESI office?
Your suggestions would be highly appreciated.
Regards,
Mohan
From India, Mumbai
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Please share your views on the following points:
1. Once the establishment is covered, its branch office automatically comes under ESIC compliance bracket. However, in certain regions where ESIC facilities or dispensaries do not exist where the company employees are working, how can we provide benefits through this scheme to those employees? Is there any exemption for compliance?
2. Company X is registered under ESIC. The nature of work of Company X is to supply manpower to various companies across India. Company X does its compliance from the head office. It has taken a sub-code where manpower is supplied. However, in some districts, it has not taken a sub-code and is sending a copy of RC half-yearly regularly to those districts without obtaining the sub-code number for the employees working there. The insurance numbers are obtained from the adjacent district.
My question is: Can Company X's employees who are deployed in those districts avail the ESIC benefits if the IP Insurance Number is obtained from the adjacent district's ESI office?
Your suggestions would be highly appreciated.
Regards,
Mohan
From India, Mumbai
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Dear kvrm2002,
We know that ESI contribution is payable for OT (overtime). This item is variable and depends on various factors. So, as you rightly said, it cannot be added to total wages for exempting an employee from coverage.
Similarly, some companies, preferably sales-related businesses, and retail showrooms give "Incentive" monthly based on reaching the targets.
My doubts are:
1. My doubt is whether "Incentive" can be treated in the same analogy as that of "OT"?
2. In case if it is a part of remuneration, whether an employee becomes exempted by adding the incentive to his gross payroll salary?
3. Also, suppose an employee is exempted at the start of the contribution period April, becomes coverable due to fall in incentive earnings in May, becomes coverable until the end of the contribution period, i.e., up to Sept. Suppose his June salary is 25000 inclusive of the incentive. Then whether contribution is payable on the entire 25000 or up to the max ceiling, i.e., 15000?
4. If the Corporation is insisting on the payment of contribution on the entire salary (inclusive of incentive). In what way does the corporation justify its stand, since the highest benefit is capped on the basis of the average salary earned by a 15000 earning guy? So, the employee stands to lose on paying contribution for Rs 25000 whereas he gets the same benefit as that of the employee earning 15000 pm?
Sir, please clear my long-pending doubts.
Ramesh, Chennai
From India, Madras
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We know that ESI contribution is payable for OT (overtime). This item is variable and depends on various factors. So, as you rightly said, it cannot be added to total wages for exempting an employee from coverage.
Similarly, some companies, preferably sales-related businesses, and retail showrooms give "Incentive" monthly based on reaching the targets.
My doubts are:
1. My doubt is whether "Incentive" can be treated in the same analogy as that of "OT"?
2. In case if it is a part of remuneration, whether an employee becomes exempted by adding the incentive to his gross payroll salary?
3. Also, suppose an employee is exempted at the start of the contribution period April, becomes coverable due to fall in incentive earnings in May, becomes coverable until the end of the contribution period, i.e., up to Sept. Suppose his June salary is 25000 inclusive of the incentive. Then whether contribution is payable on the entire 25000 or up to the max ceiling, i.e., 15000?
4. If the Corporation is insisting on the payment of contribution on the entire salary (inclusive of incentive). In what way does the corporation justify its stand, since the highest benefit is capped on the basis of the average salary earned by a 15000 earning guy? So, the employee stands to lose on paying contribution for Rs 25000 whereas he gets the same benefit as that of the employee earning 15000 pm?
Sir, please clear my long-pending doubts.
Ramesh, Chennai
From India, Madras
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Dear Ramesh,
1. Incentive cannot be treated in the same analogy as that of O.T.
2. O.T. is exempted for wage ceiling in the Act itself under the proviso to the definition of 'employee'. Therefore, we are going by the provisions of the said definition for O.T.
3. If by adding 'incentive', the employee crosses the ceiling limit, he stands exempted after the end of the relevant contribution period.
4. As and when there is no incentive, he is to be recovered and to be continued until the end of the relevant contribution period.
5. There is a ceiling for the coverage of an employee. But there is no such ceiling in the definition of wages. If you read the definition, it starts with "All remuneration paid or payable to an employee..."
A person drawing 25,000/- in the middle of a contribution period is also an employee until the end of that contribution period. Therefore, all remuneration paid or payable is wages, and therefore, the contribution is payable on the entire amount and not to be restricted to 15,000/-
6. As regards the payment of cash benefits, the 'Standard benefit rate table' in Rule 54 contains 99 wage slabs to cover the wages of an employee up to Rs. 25,000/- (which is the coverage limit for an employee with a disability). The maximum daily standard benefit rate is 480/-. If an employee gets sickness benefits for 30 days @480/-, it works out to 14,400/-. So, the benefit is not restricted to the wages of Rs. 15,000/- as presumed by you.
Hope this clarifies everything.
You are welcome to contact me via email at kvrm2002@yahoo.co.in for any doubts or clarifications.
From India, Hyderabad
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1. Incentive cannot be treated in the same analogy as that of O.T.
2. O.T. is exempted for wage ceiling in the Act itself under the proviso to the definition of 'employee'. Therefore, we are going by the provisions of the said definition for O.T.
3. If by adding 'incentive', the employee crosses the ceiling limit, he stands exempted after the end of the relevant contribution period.
4. As and when there is no incentive, he is to be recovered and to be continued until the end of the relevant contribution period.
5. There is a ceiling for the coverage of an employee. But there is no such ceiling in the definition of wages. If you read the definition, it starts with "All remuneration paid or payable to an employee..."
A person drawing 25,000/- in the middle of a contribution period is also an employee until the end of that contribution period. Therefore, all remuneration paid or payable is wages, and therefore, the contribution is payable on the entire amount and not to be restricted to 15,000/-
6. As regards the payment of cash benefits, the 'Standard benefit rate table' in Rule 54 contains 99 wage slabs to cover the wages of an employee up to Rs. 25,000/- (which is the coverage limit for an employee with a disability). The maximum daily standard benefit rate is 480/-. If an employee gets sickness benefits for 30 days @480/-, it works out to 14,400/-. So, the benefit is not restricted to the wages of Rs. 15,000/- as presumed by you.
Hope this clarifies everything.
You are welcome to contact me via email at kvrm2002@yahoo.co.in for any doubts or clarifications.
From India, Hyderabad
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