TO AVOID ESI 1) Bonus payment should not be made monthly but can be made "atleast at the interval of two months" 2) Bonus payment should not form part of "terms of contract of employment"
From India, Tiruchchirappalli
18From India, Tiruchchirappalli
bonus is an annual component. After finalising the profit & loss of an establishment. It is fixed to a rate of 8.33% to 20% from mutual understanding of both employer and employee.
From India, Bangalore
From India, Bangalore
'accounting yr' in relation to PB Act is defined u/S. 2(1) of the Act. In reln. to (i) a corpn.: the a/c yr ends on the days of closing of book of a/cs., (ii) a company: on the day on which the PL a/c is laid in its annual gen. meeting, (ii) in any other case: the yr. = 1st. april to 31st.mar. However, the employer can opt for any other a/c. year other than mentioned in (iii) provided further that he can not change the same without prior permission of the prscribed authority. Authority for granting change of a/c. yr is under Rule 3 of PB (Central) Rules, 1975. In esse, the date of payment of bonus changes acc. to the a/c. yr. under practice. Thus there is no hard & fast rule that it must be paid by Nov. though it must be paid within 8 months of such a/c. year as per practice. As per M/s. Whirlpool India Ltd. v ESIC (JT 2003(3) SC 247: 2000LLR additional remuneration to become wages under ESI Act if not paid at intervals not exceeding 2 months. However, in United Breweries Ltd. v ESIC (2003(I) LLJ 900 (HC-KER-DB): 2003 LLR 272 it was held that incentive bonus paid as per settlement will attract ESI irrespective of periodicity. So if you want to avoid ESI contribution on bimonthly incentive bonus scheme do not undergo any settlement. Hope I'm correct. Regards
From India
From India
The categories of Bonus and ESI contribution, if any, payable thereon are discussed below:
ANNUAL BONUS:
Bonus paid to the employees could not be treated as wage for the purpose of charging of contribution under Sec.2(22), provided the periodicity of the payment is more than 2 months. The said issue was also considered in the meeting of the ESI Corporation held on 19.12.1968 and the Corporation agreed to the recommendations of the Standing Committee that bonus may not be treated as wage. Hence no contribution is payable on annual Bonus.
(Earlier instructions were issued vide memo No.Ins.III/2(2)-2/67/ESIC dt. 8.2.1967).
INCENTIVE BONUS:
As per the decision of the Supreme Court delivered on 8.3.2000 in the case of M/s.Whirlpool India Ltd. Vs. ESIC in civil appeal No.1903 of 2000, additional remuneration to become wages has to be paid at intervals not exceeding two months as distinguished from being payable. Thus, there has to be actual payment and the payment of production incentive does not fall either under the 1st part or last part of the definition of the term wages as defined in Sec.2(22) of the Act, hence no contribution is payable on the incentive bonus, provided the periodicity of payment is more than 2 months.
(Earlier instructions were issued by this office vide Memo No.T-11/13/53/19-84-Ins.IV/ESIC dt. 19.9.84, Memo No.Ins.III-2(2)/2/69/ESIC dt,. 26.12.73, Memo No.T-11/13/54/18/82-Ins.IV dt. 14.7.82 & Memo No.D/Ins.5(5)/68/ESIC dt. 18.9.88.)
PRODUCTION BONUS:
Production Bonus like incentive bonus is paid to the workers as additional remuneration and hence like incentive bonus such additional remuneration in order to become wages has to be paid at intervals not exceeding 2 months as distinguished from being payable. Thus, there has to be actual payment and hence no contribution is payable, provided periodicity of the payment is more than 2 months.
(Earlier instructions issued vide letter dated 4(2)/13/74-Ins.IV dated 2.9.85)
INAM/EX-GRATIA PAYMENT:
Inam represents a payment made by the employer to any employee as a reward for the services rendered by him for which he is/was not under obligation to render the same under the contract of service which is expressed or implied but does not include the payment which have been made to an employee in fulfillment of contract of service. This may include exgratia payment.
Where Inam is being paid for special skill or higher responsibilities/additional duties, it may be taken as remuneration and contribution is payable.
Where the employer has introduced the scheme of Inam but according to terms and conditions the employer has no right to withdraw it or revise it, the same may be treated as wages and contribution is payable.
Where the employer has introduced the scheme of Inam and he has right to revise or withdraw it at his discretion, the payment of Inam under such scheme may not be treated as wages and contribution is not payable provided the payment is made at an interval exceeding two months..
Where there is no scheme of Inam in writing but still employer might be making payment under the head Inam on the basis of some understanding between the parties, in such cases, the nature of payment and its periodicity may be ascertained and whether payment of Inam is an exgratia payment which is not covered by the contract of service. In case the periodicity is more than 2 months, no contribution may be charged.
(Last instructions were issued vide letter No.D-Ins.5(5)/68/ESIC dated 21.2.1975).
From India
ANNUAL BONUS:
Bonus paid to the employees could not be treated as wage for the purpose of charging of contribution under Sec.2(22), provided the periodicity of the payment is more than 2 months. The said issue was also considered in the meeting of the ESI Corporation held on 19.12.1968 and the Corporation agreed to the recommendations of the Standing Committee that bonus may not be treated as wage. Hence no contribution is payable on annual Bonus.
(Earlier instructions were issued vide memo No.Ins.III/2(2)-2/67/ESIC dt. 8.2.1967).
INCENTIVE BONUS:
As per the decision of the Supreme Court delivered on 8.3.2000 in the case of M/s.Whirlpool India Ltd. Vs. ESIC in civil appeal No.1903 of 2000, additional remuneration to become wages has to be paid at intervals not exceeding two months as distinguished from being payable. Thus, there has to be actual payment and the payment of production incentive does not fall either under the 1st part or last part of the definition of the term wages as defined in Sec.2(22) of the Act, hence no contribution is payable on the incentive bonus, provided the periodicity of payment is more than 2 months.
(Earlier instructions were issued by this office vide Memo No.T-11/13/53/19-84-Ins.IV/ESIC dt. 19.9.84, Memo No.Ins.III-2(2)/2/69/ESIC dt,. 26.12.73, Memo No.T-11/13/54/18/82-Ins.IV dt. 14.7.82 & Memo No.D/Ins.5(5)/68/ESIC dt. 18.9.88.)
PRODUCTION BONUS:
Production Bonus like incentive bonus is paid to the workers as additional remuneration and hence like incentive bonus such additional remuneration in order to become wages has to be paid at intervals not exceeding 2 months as distinguished from being payable. Thus, there has to be actual payment and hence no contribution is payable, provided periodicity of the payment is more than 2 months.
(Earlier instructions issued vide letter dated 4(2)/13/74-Ins.IV dated 2.9.85)
INAM/EX-GRATIA PAYMENT:
Inam represents a payment made by the employer to any employee as a reward for the services rendered by him for which he is/was not under obligation to render the same under the contract of service which is expressed or implied but does not include the payment which have been made to an employee in fulfillment of contract of service. This may include exgratia payment.
Where Inam is being paid for special skill or higher responsibilities/additional duties, it may be taken as remuneration and contribution is payable.
Where the employer has introduced the scheme of Inam but according to terms and conditions the employer has no right to withdraw it or revise it, the same may be treated as wages and contribution is payable.
Where the employer has introduced the scheme of Inam and he has right to revise or withdraw it at his discretion, the payment of Inam under such scheme may not be treated as wages and contribution is not payable provided the payment is made at an interval exceeding two months..
Where there is no scheme of Inam in writing but still employer might be making payment under the head Inam on the basis of some understanding between the parties, in such cases, the nature of payment and its periodicity may be ascertained and whether payment of Inam is an exgratia payment which is not covered by the contract of service. In case the periodicity is more than 2 months, no contribution may be charged.
(Last instructions were issued vide letter No.D-Ins.5(5)/68/ESIC dated 21.2.1975).
From India
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