Dear all,
I would like to invite comments on the query of whether the company is liable to pay ESI on arrears of wages. Sometimes, VDA notification is received late, and we are bound to pay arrears of VDA from a retrospective effect. Sometimes, we give increments from a back date and pay wages from a back date. Are we required to pay ESI on these arrears? Please comment.
From India, Delhi
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174I would like to invite comments on the query of whether the company is liable to pay ESI on arrears of wages. Sometimes, VDA notification is received late, and we are bound to pay arrears of VDA from a retrospective effect. Sometimes, we give increments from a back date and pay wages from a back date. Are we required to pay ESI on these arrears? Please comment.
From India, Delhi
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Dear Sir,
As per the above statement, VDA is part of the gross salary. If VDA increases, the gross salary will automatically rise as well. Sometimes, companies provide arrears from April to July in August, so we have to pay arrears in ESIC as well.
Thank you.
From India, Thana
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As per the above statement, VDA is part of the gross salary. If VDA increases, the gross salary will automatically rise as well. Sometimes, companies provide arrears from April to July in August, so we have to pay arrears in ESIC as well.
Thank you.
From India, Thana
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Dear Nagar But why not deduction On ESIC account ,Please justify Why PF to be deducted and why not ESIC.
From India, Delhi
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From India, Delhi
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It all depends on the date on which the VDA is announced. All arrears payment relating to the periods prior to the date of announcement is not to be considered for the payment of contribution. All VDA payments made after the date of the announcement of VDA, whether in arrears or current, will attract ESI contribution.
From India, Hyderabad
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From India, Hyderabad
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Dear All,
The payment of ESI contributions is more and more beneficial to the employee to avail the daily rate of benefits, sickness benefit, maternity benefit, disablement benefit, and cash benefit. There may be chances for a belated announcement of VDA points, and the employer's salary revision may take 3 or 4 months after it becomes due. So, the provision should not be misconceived, and the employer may circumvent this provision to make a short payment on the statutory payment.
The purpose of the Act is to extend social security benefits to the weaker section (employees). Therefore, as per the principles of natural justice, the benefit of doubt always goes to the weaker section. Hence, the EPF contribution is a must on arrears payment, regardless of the reason.
Thank you.
From India, Madras
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The payment of ESI contributions is more and more beneficial to the employee to avail the daily rate of benefits, sickness benefit, maternity benefit, disablement benefit, and cash benefit. There may be chances for a belated announcement of VDA points, and the employer's salary revision may take 3 or 4 months after it becomes due. So, the provision should not be misconceived, and the employer may circumvent this provision to make a short payment on the statutory payment.
The purpose of the Act is to extend social security benefits to the weaker section (employees). Therefore, as per the principles of natural justice, the benefit of doubt always goes to the weaker section. Hence, the EPF contribution is a must on arrears payment, regardless of the reason.
Thank you.
From India, Madras
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Dear Mr. Malik,
With reference to your query on the above subject, there is no necessity for the employer to pay ESI contributions on arrears. Kindly refer to the information shared by one of our members in the ESIC Employer's Guide.
Thanks & Regards,
V R RAO PULIPAKA.
From India, Hyderabad
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With reference to your query on the above subject, there is no necessity for the employer to pay ESI contributions on arrears. Kindly refer to the information shared by one of our members in the ESIC Employer's Guide.
Thanks & Regards,
V R RAO PULIPAKA.
From India, Hyderabad
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Dear All, The Contribution on Arrear Wages is applicable only under EPF Act. There is no such provision under the ESIC Regulatations.
From India, Madras
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From India, Madras
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Sir(s), The contributions on arrears of wages paid to any employee is payable under ESI Act, 1948 from the date the said enhancement of wages is announced by the employer.
From India, Noida
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From India, Noida
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Dear Harsh Kumar ji,
This old discussion was brought back to life, but with the wrong answer. One of the contributing members, Amit_thkr86, has provided documentary evidence that ESI is not applicable on arrears. I kindly request you to review it. If you have any contradictory information, please share it so that members can rectify their understanding and update their knowledge.
Thank you.
From India, Mumbai
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This old discussion was brought back to life, but with the wrong answer. One of the contributing members, Amit_thkr86, has provided documentary evidence that ESI is not applicable on arrears. I kindly request you to review it. If you have any contradictory information, please share it so that members can rectify their understanding and update their knowledge.
Thank you.
From India, Mumbai
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Dear Korgaonkar ji,
I feel it very sorry that a senior member like you have termed my remarks as wrong.
While writing my remarks in these columns, I have added nothing from myself. Rather I have tried to place before the members the correct position regarding payment of contribution under ESI Act, 1948 on arrears of wages paid to employees.
The Employers' Guide of ESIC to which one of the member has referred lays down "......the liability towards payment of contribution accrues only in the month in which the decision is announced and no contribution is payable on the arrears pertaining to the period prior to the month of declaration/announcement."
Sir, for example if in any establishment covered under ESI Act, the decision to enhance the wages is announced/declared in the month of January, 2014, but the arrears of wages are calculated and actually paid by employer in the month of April, 2014, then in my opinion, contribution on such arrears of wages for the period from January, 2014 to March, 2014 will be payable.
I hope your goodself will correct me if I am wrong in any way. I may, however, also add that the term " wages" as defined under Section 2(22) of said Act defines “wages” as"all remuneration paid or payable".
From India, Noida
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I feel it very sorry that a senior member like you have termed my remarks as wrong.
While writing my remarks in these columns, I have added nothing from myself. Rather I have tried to place before the members the correct position regarding payment of contribution under ESI Act, 1948 on arrears of wages paid to employees.
The Employers' Guide of ESIC to which one of the member has referred lays down "......the liability towards payment of contribution accrues only in the month in which the decision is announced and no contribution is payable on the arrears pertaining to the period prior to the month of declaration/announcement."
Sir, for example if in any establishment covered under ESI Act, the decision to enhance the wages is announced/declared in the month of January, 2014, but the arrears of wages are calculated and actually paid by employer in the month of April, 2014, then in my opinion, contribution on such arrears of wages for the period from January, 2014 to March, 2014 will be payable.
I hope your goodself will correct me if I am wrong in any way. I may, however, also add that the term " wages" as defined under Section 2(22) of said Act defines “wages” as"all remuneration paid or payable".
From India, Noida
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Dear Harsh Kumar ji,
Thank you very much for your response to my comments. Your response compelled me to study the subject matter once again very carefully. On my fresh study I am convinced myself that you are absolutely correct and I made a mistake in reading and interpreting this subject.
To bring more clarity in this subject, I am giving below the text on the subject matter in the ESI Revenue Mannual:
L 8.19 Contributions on wages paid for back periods (arrears of wages): The question of payment of wages for back period arises in any one of the following contingencies:-
1. Sanction and payment of increment from a previous period;
2. Any increase in wages/remuneration is declared from a retrospective date as a result of wage revision under mutual agreement with the employees’ association/union and the management;
3. Periodical increases in Dearness Allowance from a back date;
4. An award of a tribunal or a judgment of any Court; and
5. A unilateral decision by the Management effecting increase in pay.
In all the above contingencies, the liability towards payment of contribution accrues only from the month in which the increment is sanctioned, agreement is entered in to, increase is announced, judgment is pronounced, or decision is taken as the case may be. There is no need to pay any contribution on the arrears pertaining to the period prior to the month of declaration/announcement/agreement as the case may be.
From India, Mumbai
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Thank you very much for your response to my comments. Your response compelled me to study the subject matter once again very carefully. On my fresh study I am convinced myself that you are absolutely correct and I made a mistake in reading and interpreting this subject.
To bring more clarity in this subject, I am giving below the text on the subject matter in the ESI Revenue Mannual:
L 8.19 Contributions on wages paid for back periods (arrears of wages): The question of payment of wages for back period arises in any one of the following contingencies:-
1. Sanction and payment of increment from a previous period;
2. Any increase in wages/remuneration is declared from a retrospective date as a result of wage revision under mutual agreement with the employees’ association/union and the management;
3. Periodical increases in Dearness Allowance from a back date;
4. An award of a tribunal or a judgment of any Court; and
5. A unilateral decision by the Management effecting increase in pay.
In all the above contingencies, the liability towards payment of contribution accrues only from the month in which the increment is sanctioned, agreement is entered in to, increase is announced, judgment is pronounced, or decision is taken as the case may be. There is no need to pay any contribution on the arrears pertaining to the period prior to the month of declaration/announcement/agreement as the case may be.
From India, Mumbai
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NO ESI ON ARREARS ( ESI EMPLOYER GUIDE )[1].pdf