PF is computed on basic and DA only. For ESIC, it's on gross wages. If incentives are paid quarterly, it is not a part of gross monthly wages and therefore will not be included. However, if incentives are steady at a standard rate (not variable) or if they are based on hours worked (overtime), then they would be included for ESIC.
From India, Mumbai
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2638From India, Mumbai
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Dear Sh. Saswata Banerjee ji,
Thank you for your remarks on the previous page. I believe that when a contractor worker is absent, and if leave of any kind is sanctioned for that period, it will amount to "leave with wages" on which contributions are payable as per the said Act. Owners of the units, including contractors, are free to maintain the records in whichever way they prefer. However, while sharing our views on this site, I think it would be better if our perspectives are grounded in provisions of the law or instructions issued by the appropriate authorities.
Thank you again.
From India, Noida
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Thank you for your remarks on the previous page. I believe that when a contractor worker is absent, and if leave of any kind is sanctioned for that period, it will amount to "leave with wages" on which contributions are payable as per the said Act. Owners of the units, including contractors, are free to maintain the records in whichever way they prefer. However, while sharing our views on this site, I think it would be better if our perspectives are grounded in provisions of the law or instructions issued by the appropriate authorities.
Thank you again.
From India, Noida
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Harsh,
Let us not deny the reality simply because the law says otherwise. If people obeyed the law, our forum would not even have been needed perhaps :)
In many cases, contractors are deducting salary for EVERY absence of workers. Instead, they are paying wages for 1.5 days extra per month to take care of "encashment of leave wages." That is not sanctioned leave. How the records are maintained is not going to change that. In fact, those records may be falsified, which only makes it worse.
From India, Mumbai
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Let us not deny the reality simply because the law says otherwise. If people obeyed the law, our forum would not even have been needed perhaps :)
In many cases, contractors are deducting salary for EVERY absence of workers. Instead, they are paying wages for 1.5 days extra per month to take care of "encashment of leave wages." That is not sanctioned leave. How the records are maintained is not going to change that. In fact, those records may be falsified, which only makes it worse.
From India, Mumbai
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Not necessary for deduction of ESI in Leave Encashment payment. Not necessary for deduction of ESI & PF as these amounts not being in monthly salary.
From India, Hyderabad
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From India, Hyderabad
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Devesh,
Some additional information related to your original question and the subsequent thread...
I just found at a client's place. The ESIC officials have specifically asked for the records related to the computation of production incentives, and have been tallying that with in and out records, and asking for the incentive scheme details, how it was communicated etc.
So, if you are giving production incentive, the ESIC guys may actually check the records to trace your working and penalize you for trying to avoid ESIC by calling overtime as production incentive. So be careful of how you structure your salary. The penalty and persecution are mostly not worth the ESIC cost saved.
From India, Mumbai
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Some additional information related to your original question and the subsequent thread...
I just found at a client's place. The ESIC officials have specifically asked for the records related to the computation of production incentives, and have been tallying that with in and out records, and asking for the incentive scheme details, how it was communicated etc.
So, if you are giving production incentive, the ESIC guys may actually check the records to trace your working and penalize you for trying to avoid ESIC by calling overtime as production incentive. So be careful of how you structure your salary. The penalty and persecution are mostly not worth the ESIC cost saved.
From India, Mumbai
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
EPFO Circular Leave Encashment.jpg