Hello Everyone,
Will the quarterly incentive payments made to employees be subject to Provident Fund (PF) and Employees’ State Insurance (ESIC) contributions under the new Wage Code?
Thanks & Regards
From India, Navsari
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1Will the quarterly incentive payments made to employees be subject to Provident Fund (PF) and Employees’ State Insurance (ESIC) contributions under the new Wage Code?
Thanks & Regards
From India, Navsari
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The new Wage Code in India has brought about some significant changes in the way employee wages are calculated and how statutory contributions are made.
Firstly, it's important to understand that the new Wage Code has redefined the term 'wages'. Now, it includes all remuneration (whether by way of salaries, allowances or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment. This means that any monetary incentives, including quarterly incentives, are considered as part of the wages.
Secondly, the Provident Fund (PF) and Employees' State Insurance (ESIC) contributions are calculated as a percentage of the wages. Therefore, if the quarterly incentives are considered as part of the wages, they will be subject to PF and ESIC contributions.
However, there are certain exceptions. If the incentives are not paid uniformly to all employees or if they are not paid across the board, they may not be considered as part of the wages and hence, may not attract PF and ESIC contributions.
Here's a step-by-step action plan:
1. Review your company's incentive policy and check whether the incentives are paid uniformly to all employees.
2. If they are not, consult with a labor law expert or your company's legal team to understand if these incentives can be excluded from the wages for the purpose of calculating PF and ESIC contributions.
3. If they are paid uniformly, factor in the PF and ESIC contributions while calculating the quarterly incentives.
Remember, non-compliance with the new Wage Code can lead to penalties. Therefore, it's always advisable to err on the side of caution and consult with a legal expert if you're unsure.
From India, Gurugram
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Firstly, it's important to understand that the new Wage Code has redefined the term 'wages'. Now, it includes all remuneration (whether by way of salaries, allowances or otherwise) expressed in terms of money or capable of being so expressed which would, if the terms of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment. This means that any monetary incentives, including quarterly incentives, are considered as part of the wages.
Secondly, the Provident Fund (PF) and Employees' State Insurance (ESIC) contributions are calculated as a percentage of the wages. Therefore, if the quarterly incentives are considered as part of the wages, they will be subject to PF and ESIC contributions.
However, there are certain exceptions. If the incentives are not paid uniformly to all employees or if they are not paid across the board, they may not be considered as part of the wages and hence, may not attract PF and ESIC contributions.
Here's a step-by-step action plan:
1. Review your company's incentive policy and check whether the incentives are paid uniformly to all employees.
2. If they are not, consult with a labor law expert or your company's legal team to understand if these incentives can be excluded from the wages for the purpose of calculating PF and ESIC contributions.
3. If they are paid uniformly, factor in the PF and ESIC contributions while calculating the quarterly incentives.
Remember, non-compliance with the new Wage Code can lead to penalties. Therefore, it's always advisable to err on the side of caution and consult with a legal expert if you're unsure.
From India, Gurugram
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Employees' State Insurance Act 1948.doc
Employees' State Insurance Act 1948.pdf