Dear All,
After looking at such wonderful response to my earlier post regarding PF, I thought of starting a similar thread on ESI. ESI is a Statute which affect almost everyone in our field. The most disputed part of ESI is invariably the case of Conveyance. Some Companies deduct Conveyance while calculating Gross Salary some donot. In here I will try to deal with this part:
Conveyance or Travelling as part of Salary should always be taken as a part of Gross Salary for calculating ESI Contributions the reason being the exclusion is for Travelling Expenditure and not any Allowance which is paid under the head of Travelling/Conveyance.
Well what is the difference??
CASE I:
Any compensation which is in a nature of an allowance by whatever name it may be called (You can call it Expenditure also) is a compensation that is paid to an employee if he fulfills the terms and conditions of service and, is not related or compulsory for the employee to spend under the heading it is paid, and/or is central to the execution of the job.
Let me give an example:
Like Companies which have Conveyance Allowance in majority of cases do not differentiate between two employees on the distance the employee needs to travel to come to office. In majority of cases Conveyance is either a fixed sum for a particular level like Manager or is paid as a percentage of Basic/Basic and DA. So, if one Manager who can walk to his Office receives the same allowance as the Manager who might have to travel a long distant to reach office.
Second, it does not matter whether the Manager is drop to Office by his relative or friend, he still receives the Allowance although his expenditure regarding Conveyance is nil.
Third, It does not matter how you spend the money or under what head you pay like he can set aside his Conveyance Allowance for paying his children's school salary.
Fourth, the Allowance is not central to carrying out the job or worki .e., an employee doesnot depend on the allowance to execute the job. He may need less or more for carrying on his job.
In this case the Amount paid is to be included in ESI.
CASE II:Amounts to be Excluded:
Any Travelling expenditure incurred by employee reimbursed by employer to come to work and any reimbursement paid to expenses incurred in doing official work are not included.
For example, suppose the Factory is situated on the other side of the River, and there is a Ferry Service, all other routes to the Factory are either very long or there is no other route. If the employer pays the fare of the Ferry Service directly to the employee, it is to be excluded.
Similarly, travelling expenditures are directly paid to employees who work in remote places, Oil Rigs in Sea ect., along with the Salary.
When payment is directly related to travelling, is incurred only on account of travelling and is central to carrying out the job and in absence of the payment, it may not be viable for the employee to continue on the job.
This is the type of payment which is to be excluded from ESI.
Hope to get feedbacks.
Regards,
SC
From India, Thane
45After looking at such wonderful response to my earlier post regarding PF, I thought of starting a similar thread on ESI. ESI is a Statute which affect almost everyone in our field. The most disputed part of ESI is invariably the case of Conveyance. Some Companies deduct Conveyance while calculating Gross Salary some donot. In here I will try to deal with this part:
Conveyance or Travelling as part of Salary should always be taken as a part of Gross Salary for calculating ESI Contributions the reason being the exclusion is for Travelling Expenditure and not any Allowance which is paid under the head of Travelling/Conveyance.
Well what is the difference??
CASE I:
Any compensation which is in a nature of an allowance by whatever name it may be called (You can call it Expenditure also) is a compensation that is paid to an employee if he fulfills the terms and conditions of service and, is not related or compulsory for the employee to spend under the heading it is paid, and/or is central to the execution of the job.
Let me give an example:
Like Companies which have Conveyance Allowance in majority of cases do not differentiate between two employees on the distance the employee needs to travel to come to office. In majority of cases Conveyance is either a fixed sum for a particular level like Manager or is paid as a percentage of Basic/Basic and DA. So, if one Manager who can walk to his Office receives the same allowance as the Manager who might have to travel a long distant to reach office.
Second, it does not matter whether the Manager is drop to Office by his relative or friend, he still receives the Allowance although his expenditure regarding Conveyance is nil.
Third, It does not matter how you spend the money or under what head you pay like he can set aside his Conveyance Allowance for paying his children's school salary.
Fourth, the Allowance is not central to carrying out the job or worki .e., an employee doesnot depend on the allowance to execute the job. He may need less or more for carrying on his job.
In this case the Amount paid is to be included in ESI.
CASE II:Amounts to be Excluded:
Any Travelling expenditure incurred by employee reimbursed by employer to come to work and any reimbursement paid to expenses incurred in doing official work are not included.
For example, suppose the Factory is situated on the other side of the River, and there is a Ferry Service, all other routes to the Factory are either very long or there is no other route. If the employer pays the fare of the Ferry Service directly to the employee, it is to be excluded.
Similarly, travelling expenditures are directly paid to employees who work in remote places, Oil Rigs in Sea ect., along with the Salary.
When payment is directly related to travelling, is incurred only on account of travelling and is central to carrying out the job and in absence of the payment, it may not be viable for the employee to continue on the job.
This is the type of payment which is to be excluded from ESI.
Hope to get feedbacks.
Regards,
SC
From India, Thane
Dear Satya,
I had posted the reply but due to some technical problem in our server it has not been posted.
Let me say it once again:
Any compensation by whatever name called in nature of Allowance in general should be considered for ESI except for the following:
1)If the allowance is in nature of reimbursement and depends on the actual expenditure.
2) The amount is not fixed and is not more than the actual expenses any employee of the class/rank will spend on a normal circumstances.
3) Is not related to any other benefit and is independent and specific in nature, hence the character of the amount can be classified under Special Expenditure.
Regards,
SC
From India, Thane
I had posted the reply but due to some technical problem in our server it has not been posted.
Let me say it once again:
Any compensation by whatever name called in nature of Allowance in general should be considered for ESI except for the following:
1)If the allowance is in nature of reimbursement and depends on the actual expenditure.
2) The amount is not fixed and is not more than the actual expenses any employee of the class/rank will spend on a normal circumstances.
3) Is not related to any other benefit and is independent and specific in nature, hence the character of the amount can be classified under Special Expenditure.
Regards,
SC
From India, Thane
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