allowances and minmum wage act

8/4/2019 Allowances and Minmum Wage Act

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In India, Dearness allowance (D.A.) is part of a person'ssalary. D.A. is calculated as a

percent of the basic salary. This amount is then added to the basic salary along with house

rent allowance to get the total salary. Rates vary as per rural/urban areas etc.

Pensioners and the family pensioners are granted D.A. against the price rise. During the

reemployment under Central or State Government, Government undertaking, Autonomous

body or Local Body, they are not eligible to draw D.A., in which case D.A. is allowed in

addition to fixed pay or time scale. In other cases of reemployment D.A. is allowed subject to

the limit of emoluments last drawn. D.A. is not allowed while the pensioner stays abroad and

also in case of employees absorbed in public undertaking or bodies. If the pensioner stayed

abroad without reemployment, he shall be eligible to draw D.A. on pension

The dearness allowance is a part of the total compensation a person receives for having performed

his or her job. For example, workers in India might have a base salary or pension, along with an

allowance for housing and the dearness allowance. D.A. is a percentage of the original salary. The

percentage is reviewed and may be changed on a six-month cycle.

One explanation for D.A., according to work guidelines, is that the Dearness Allowance is provided to

help against rise in prices for those on pension. This allowance may also be provided to family

members receiving benefits from a workers pension. For example, a central government order might

change the Dearness Allowance by 6 percent foremployees of the main branch of government, due to

new information about living expenses and price increases. The amount might be paid in a lump

sum at some point to bring the overall pension and allowances up to what they should be.

There are also times when a new level of Dearness Allowance might be established along with

housing and transportation allowances. This generally occurs when the overall pay schedule is

revised. Base salary levels are reported separate from the various allowances. In India the D.A. has a

history dating back to World War II. At that time, many of the lower-paid employees received D.A.

based on their wages or salaries. Many changes to Dearness Allowance and its computations have

occurred over the last 60 years, according to both private and government studies.
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Travel Allowance

The purpose of the policy is to provide staff members with an allowanceto be used by the staff member to defray the costs of running his or herprivate motor vehicle which will be required to be used by him or herfrom time to time for UCT-related business.

Eligibility and Rules

All senior, permanent, full-time staff members whose cost ofemployment is at or above a specified level and whose position or postis of such a nature that their private motor vehicle needs to be used bythem for UCT-related business from time to time, are eligible toparticipate. Details regarding eligibility are available from the HumanResources Department.

HOUSE RENT ALLOWANCE


(HRA) is generally paid as component of salary package. This allowance is given by an

employer to an employee to meet the cost of renting which is increased very

much..order for hra the following condition should be meet.

1. Rental House

2. Not owned by you or your spouse.

3. Rent Slips1. Exception:-

Minimum of the following three is exempt:

-Actual HRA received

- Rent paid minus 10% of Salary

- 50% of salary if you live in Metros, otherwise 40% of Salary

2.Ideal rent

ideal rent amount for the Rent Receipt you need to submit to your employer. Follow thesimple formula:
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Ideal Rent = HRA + 10% of Salary

3. Stay with parents:-

Yes you can claim the exception but if the lanlord is spouse it is not advisable to claim

the exception.

Own a property but living on rent;

if you have a owned property in differ city and a rented house in differ city both exception

can be claimed but the owned property shouldnt be rented.

but if you have owned and rented in same city it's normally couldnt be claimed. but in

metros yoyu can prove the distance of the office and owned hose and then only you can

claimed

WASHING ALLOWANCE:

It is a sum paid to defray special expenses entailed by thenature of employment and as such this amount does notamount to wages.(In lieu of old instructions issued vide Memo No.Ins.III/2/1/65

dt. 8.2.1967)SUSPENSION ALLOWANCE/SUBSISTENCE ALLOWANCE

During the suspension period the employee is not allowed toactually work and he is not given full remuneration but the

permissible subsistence allowance is paid to the employee byway of remuneration for remaining attached to the services ofthe employer as per the relevant service regulations governinghis contract of service, therefore, the subsistence allowance ispart of wage as defined under Sec.2(22) of the ESI Act andconsequently on the amount of subsistence allowance paid to

the suspended employee, contribution is payable.

Supreme Court has also held in the case of RD, ESICVs.M/s.Popular Automobiles etc.in its judgement dt. 29.9.97 inCivil appeal no.3850 of 1993 that suspension/subsistenceallowance is wage and contribution is payable under Sec.2(22)on the said amount.(In lieu of earlier instructions were issued vide Memo No.3(2)-

1/67 dt. 3.6.67 & letter No.Ins.III(2)-2/71 dt. 10.8.1971)


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SALARY

1. What is the meaning of Salary?For Income Tax purposes, Salary includes the pay, allowances, bonus or

commission payable monthly or otherwise or any monetary payment

which may be called by any name from one or more employers.

2. What are the components of Salary?Some of the inclusions in the salary are:

a. Wages;

b. Any annuity or pension;

c. Any gratuity;

d. Any fees, commissions, perquisites or profits in lieu of or in addition

to any salary or wages;

e. Any advance salary;
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f. Leave Encashment

g. Any other monetary payment by the employer

3. Are allowances given by the employer to be actually spent to avail

exemption?Yes, allowance given by the employer has to be actually spent to avail

exemption

4. In case of an employee residing in his own house, is the HRA

exempt from tax?No, since he is not paying any rent the entire HRA is taxable. HRA

exemption is based on a formula and if rent paid is NIL, full HRA is

taxable.

5. Is the Transport/Conveyance Allowance taxable?Transport/Conveyance allowance is exempt upto Rs. 800 per month

subject to actual spend for official purpose. Amount spent on traveling

between home to office and vice versa is also considered to be official

purpose.

6. When can I claim LTA and when is this taxable?You may claim LTA as per your company/employers policy. The LTAis not taxable twice in a block of four calendar years (Jan-Dec, currently

the block is 2006-2009) based on actual spend. The journey can be

performed to any place within India through road, rail or air (economy

class only). Any claim more than twice in the block of 4 years is taxable.

7. I get reimbursement of medical expenses incurred by me from my

employer. Is it taxable? What if I get a medical allowance?Medical allowance or reimbursement is not taxable upto Rs. 15,000 in a

financial year subject to actual spend. If it is given as an allowance, then

it will not be taxable upto the amount incurred by you on medical

expenses/treatment for your dependents, subject to a limit of Rs. 15,000

per annum. Any amount over and above Rs. 15,000 is taxable.

8. What is the treatment of bonus and commissions?

These are fully taxable.


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9. My employer contributes towards EPF as a part of my salary. Is it

taxable?Contribution to EPF upto 12% by employer is not taxable. You may

contribute any amount without any limit for which you will get a

deduction. If you withdraw EPF during the continuance of employment

or before expiry of 5 years from becoming a member even in case of

cessation of employment (leaving the service/job), it will be fully taxable

in the year of withdrawal.

10. Is Education allowance taxable?

Education allowance is not taxable upto Rs. 100 per month per child

subject to a maximum of two kids.

11. What about Other allowances?All other allowances by whatever name called are taxable. Some special

allowances to Government employees may be exempt.

12. Is foregone salary taxable?The voluntary foregoing of salary due to an Assessee is only an

application of income. Hence that foregone salary is taxable.

13. Is pension to be taxed as salary?Yes, they are to be taxed under the head 'salaries'. In some cases,

commuted pension may not be taxable.

14. Can an employee receive gratuity from more than one employer

during any previous year? What are the tax implications?

Yes, he can receive gratuity from more than one employer, but themaximum amount exempt from tax cannot exceed least of (i) Rs

3,50,000/-

(ii) Half-months salary for each completed year of service

(iii) Gratuity actually received.

15. Is Leave Encashment taxable?Leave encashment during the continuance of job is fully taxable.

However, if one gets leave encashment on cessation of employment


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(leaving the service/job), it is not taxable subject to certain limits as

under:

1. Notified Amount (Currently Rs. 2,40,000)

2. 10 months average salary

3. Leave encashment salary received on termination

4. (Leave Entitlement - Leave Availed) * Average Monthly Salary

In case of Government employees, leave encashment on retirement is not

taxable.

16. Are gifts made in kind by the employer a taxable perquisite?Yes, the perquisite value would be the market price of the gifted article.

However, if the value of such gifts up to Rs.5,000 in the aggregate per

annum would be exempt, beyond which it would be taxed as a perquisite.Gifts, which are made in cash or convertible into money (eg. Gift

cheques) are not exempted.

17) Is the amount spent on membership fee by the employer on the

membership of the employee in a professional institution a taxable

perquisite?Yes, it is taxable.


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Wages

WASHING ALLOWANCE:

It is a sum paid to defray special expenses entailed by the nature of employment and as such thisamount does not amount to wages.(In lieu of old instructions issued vide Memo No.Ins.III/2/1/65 dt. 8.2.1967)SUSPENSION ALLOWANCE/SUBSISTENCE ALLOWANCE

During the suspension period the employee is not allowed to actually work and he is not given full

remuneration but the permissible subsistence allowance is paid to the employee by way ofremuneration for remaining attached to the services of the employer as per the relevant serviceregulations governing his contract of service, therefore, the subsistence allowance is part of wageas defined under Sec.2(22) of the ESI Act and consequently on the amount of subsistenceallowance paid to the suspended employee, contribution is payable.

Supreme Court has also held in the case of RD, ESIC Vs.M/s.Popular Automobiles etc.in itsjudgement dt. 29.9.97 in Civil appeal no.3850 of 1993 that suspension/subsistence allowance iswage and contribution is payable under Sec.2(22) on the said amount.(In lieu of earlier instructions were issued vide Memo No.3(2)-1/67 dt. 3.6.67 & letterNo.Ins.III(2)-2/71 dt. 10.8.1971)

OVERTIME ALLOWANCE

In the case of the employer as and when the employer finds the need to have work doneexpeditiously, in addition to the normal work during the course of the working hours, theemployer offers to the employee to do the overtime work after the working hours. When

employee does overtime work it amounts to the acceptance for the same, hence there emergesconcluded implied contract between the employer and the employee. Both the remunerationreceived during the working hours and overtime constitutes a composite wage and thereby it is awage within the meaning of Sec.2(22) of the ESI Act. Therefore, the contribution is payable onthe overtime allowance. However, overtime allowances will be considered as wage for thepurpose of charging the contribution only and will not be considered for the purpose of thecoverage of the employee under the Scheme.

The same view was held by the Supreme Court in its judgement delivered on 6.11.96 in the caseof Indian Drugs & Pharmaceuticals Ltd. Vs. ESIC, in Civil Appeal No.2777 of 1980.(Old instructions issued vide memo No.3-1(2)/3(1)/68 dt. 31.5.68).

ANNUAL BONUS:

Bonus paid to the employees could not be treated as wage for the purpose of charging ofcontribution 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 notbe treated as wage. Hence no contribution is payable on annual Bonus.(Earlier instructions were issued vide memo No.Ins.III/2(2)-2/67 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.WhirlpoolIndia Ltd. Vs. ESIC in civil appeal No.1903 of 2000, additional remuneration to become wageshas 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 eitherunder the 1st part or last part of the definition of the term wages as defined in Sec.2(22) of theAct, 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 dt.19.9.84, Memo No.Ins.III-2(2)/2/69 dt,. 26.12.73, Memo No.T-11/13/54/18/82-Ins.IV dt.


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14.7.82 & Memo No.D/Ins.5(5)/68 dt. 18.9.88.)

PRODUCTION BONUS:

Production Bonus like incentive bonus is paid to the workers as additional remuneration andhence 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 beactual payment and hence no contribution is payable, provided periodicity of the payment is morethan 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 servicesrendered by him for which he is/was not under obligation to render the same under the contractof service which is expressed or implied but does not include the payment which have been madeto 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 betaken as remuneration and contribution is payable.

Where the employer has introduced the scheme of Inam but according to terms and conditionsthe employer has no right to withdraw it or revise it, the same may be treated as wages andcontribution is payable.

Where the employer has introduced the scheme of Inam and he has right to revise or withdraw itat his discretion, the payment of Inam under such scheme may not be treated as wages andcontribution 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 exgratiapayment which is not covered by the contract of service. In case the periodicity is more than 2months, no contribution may be charged.

(Last instructions were issued vide letter No.D-Ins.5(5)/68 dated 21.2.1975).

WAGES PAID DURING LAYOFF:

During the period of layoff though the employee is not given actual work and is also not given fullremuneration but certain wages are paid to the employee by way of remuneration for remainingattached to the factory/establishment of the employer, therefore, such payments paid for theperiod of layoff are also wages for the purpose of Sec.2(22) of the ESI Act and hence contributionis payable on such payments.

(Earlier instructions were issued in 1968).

ANNUAL COMMISSION

Sales Commission would fall within the 3rd category of wages as defined underthe Act asadditional remuneration and there has to be actual payment as the word used is paid and notpayable, at intervals not exceeding two months. The question as to why the period of 2 months isfixed was debated in Supreme court in the case of Handloom House, Ernakulam Vs. RD,ESIC in

Civil Appeal No.2521 of 1999 when it was held that no employer shall have the permission todraw the payment of contribution on the premise that annual payments have to be work out.Normally, the wage period is one month, but the Parliament would have thought that such "wageperiod" may be extended a little more but no employer shall make it longer than two months.This could be the reason for fixing a period of two months as the maximum period for counting

the additional remuneration has to make it part of wage under the Act. Therefore, the annualcommission is excluded from the definition of the wages and hence no contribution is payable onthe annual commission.


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( Earlier instructions were issued vide Hqrs.letter No. Ins.III(2)-2/71 dated 10.8.71).


House Rent Allowance is wage in cases where it is being paid. Notional amount of house rent cannot be presumed as wages for deciding the coverage. In cases where an employee is being paid

house rent allowance, the same will be included both for coverage and contribution. In caseswhere the staff quarters have been allotted the amount of salary and wages paid will count forcoverage and contribution and no notional house rent allowance is to be presumed in such cases.

In the cases of Braithawait & Co. Vs. ESIC and M/s.Harihar Polyfibres Vs. ESIC, Bangalore,Supreme Court has also held that house rent allowance is a wage under Sec.2(22) of the ESIAct.(Earlier instructions were issued vide memo No.T-11/13/11/15-Ins.III dt. 28.9.75,

No.Ins.III(2)/15/15/74-Ins.Desk.I dated Dec.,76, No.T-11/13/53/19-84/Ins.IV dt. 19.9.84 &No.D.Ins.II/11/3087/303 dated 1.3.1985).

NIGHT SHIFT/HEAT/GAS & DUST ALLOWANCE:

It is an additional remuneration paid to the employee for performing duty atnight time during the

hours of darkness. This amount is paid by way of incentive under the scheme of settlemententered into between the Management and its workmen and hence are wages within the meaningof Sec.2(22) of the ESI Act. This view was observed by the Full Bench of Karnataka High Court inthe case of NGEF Ltd. Vs. Dy.Regional Director, ESIC, Bangalore. Supreme Court in the case ofM/s.Harihar Polyfibers Vs. RD ESIC, Bangalore has also held the same view. Hence, Night ShiftAllowance, Heat, Gas & Dust allowance are wages under Sec.2(22) of the ESI Act andcontribution is payable on the said amount paid by the employer to the employees.(Earlier instructions were issued vide Memo No.T-11/13/53/19/84-Ins.IV dated 19.9.94).

CONVEYANCE ALLOWANCE

Conveyance allowance is paid to the employee to compensate the expenses incurred by the

employees on travelling etc. The travelling allowance or value of any travelling concession is alsobeing paid to the employees in the nature of conveyance allowance, which is neither wages forthe purpose of coverage of employees under Sec.2(9), nor it is treated as wages for the paymentof contribution under Section 2(22) of the ESI Act.

In the case M/s.Hyderabad Asbestos Cement Products Vs. ESIC, Punjab & Haryana High Court,Chandigarh as well in the case of M/s.Harihar Polyfibres, the Supreme Court have held thatconveyance allowance is not wage under Section 2(22) of the ESI Act.(Earlier instructions were issued by this office vide No.P.11/13/97-Ins.IV dated 27.1.97.)

SERVICE CHARGES

Service charges are collected by management of the hotel on behalf of their employees in lieu ofdirect tips and the same is paid to their employees at a later date.

Such amount collected as service charges will not constitute wages under Sec.2(22) of the ESIAct. In the case of ESIC Vs. M/s.Rambagh Palace Hotel, Jaipur, the High Court of Jaipur has heldthat service charges are not wages under Section 2(22) of the ESI Act. This verdict of the HighCourt of Jaipur was accepted in the ESIC and hence no contribution is payable on servicecharges.(Earlier instructions were issued vide letter No.P-12/11/4/79-Ins.Desk.I dt. 18.9.79)

MEDICAL ALLOWANCE

The employees working in factories/establishments are being provided medical services in kind by

the employer but in certain factories/establishments instead of providing medical services in kind,the amount spent by the employees on medical care is reimbursed while in some otherorganisations, employees are being paid monthly cash allowance in lieu of medical


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aid/reimbursement of medical expenses. Where such payments are made by the employer in lieuof the medical benefit, the same are to be treated as wages under Sec.2(22) of the ESI Act andthe contribution is chargeable.(Earlier instruction were issued vide letter No.Ins.5(5)/68-Ins.III dt. 21.8.71 & Ins.III/2(2)2/68dated 24.6.71)

NEWSPAPER ALLOWANCE

In certain factories/establishments the employees are reimbursed the cost of Newspapers while insome other factories/establishments the employees are paid monthly newspapers allowanceinstead of reimbursement of the cost of the Newspapers. Where the amount is being paidregularly to the employees by the employer as Newspapers allowance the same will be treated aswages under Sec.2(22) of the ESI Act and the contribution is chargeable. However, where thecost of Newspapers is reimbursed to the employees, no contribution is to be charged on suchpayments.

EDUCATION ALLOWANCE:

Employees are being paid monthly Education allowance for the children studying in the

Schools/Colleges. Where such education allowance is being paid monthly, the same is to beconsidered as wages under Sec.2(22) of the ESI Act and the contribution is chargeable on thesaid amount.

However, in such cases where instead of paying the education allowance on monthly basis, theamount spent as fee is reimbursed to the employees and booked under education allowance, insuch cases no contribution is payable.

DRIVERS ALLOWANCE

In some of the factories/establishments the officers employed as employees are being paiddrivers allowance per month. This allowance is being paid to enable the officers to appoint adriver at their own level and such drivers employed are not being paid salary directly by the

factories/establishments. Where such allowance is being paid to the employees and the driversare not engaged by the employees, in such event the allowance paid as such will be consideredas wage under Section 2(22) of the ESI Act and contribution will be chargeable provided theemployee is coverable under the Scheme..

However, where the services of the drivers are being utilised, in such event the drivers soengaged will be covered as employee and contribution will be payable on the amount paid to thedrivers as salary and booked in the ledgers of the employer under the heading DriversAllowance.

FOOD/MILK/TIFFIN/LUNCH ALLOWANCE:

Each case of payment of Food, Milk, Tiffin and Lunch Allowance has to be examined on its meritsdepending on the following conditions under which the allowance is payable:-

Tiffin/Food/Milk/Lunch Allowance paid in cash at a fixed rate irrespective of whether the person isabsent or on authorised leave etc. may be treated as wages.Tiffin/Food/Milk/Lunch allowance paid in cash with deduction for leave or absence etc. may not betreated as wages.Tiffin/Food/Milk/Lunch allowance paid in kind i.e. canteen subsidy/food subsidy etc. may not betreated as wages.

(Earlier instructions were issued vide letter No.P-11/13/97-Ins.IV dated 2.2.1999)GAZETTED ALLOWANCE

Certain factories/establishments are paying gazetted allowance to its employees in lieu of duties

performed by them on gazetted holidays. Such gazetted allowance is not wage for the purpose ofSec.2(9) of the ESI Act. However, it will be wage for the purpose of Sec.2(22) of the ESI Act and


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the contribution are to be recovered on such payments.

WAGES AND DEARNESS ALLOWANCE FOR UNSUBSTITUTED HOLIDAYS:

Such wages and dearness allowance paid to the employees for the unsubstituted holidays are tobe treated as wages under Sec.2(22) of the Esi Act and the contribution is payable. High Court of

Gujarat in the case of ESIC Vs. New Assarw Manufacturing Co.Ltd. held the same view.

EXGRATIA PAYMENT DURING STRIKE FOR TRAVELLING EXPENSES

Like conveyance allowance if any exgratia payment is made during the period of strike to some ofthe employees to incur certain travelling expenses such amount will neither be considered aswage under Sec.2(9) nor under Sec.2(22) of the ESI Act and no contribution is payable on suchamount. High Court of Bombay in the case of ESIC Vs. Willman (India) (P) Ltd. in case No.210 of1976, held the same view.

INTERIM RELIEF:

Interim relief paid to the employees is normally paid when either the wage is under revision orwhen the payment of Dearness Allowance is delayed due to any reason. Whatsoever may be thecase, if the interim relief is paid to the employees by any employer, the same will amount thewages within the meaning of Sec.2(22) of the ESI Act and contribution is payable thereon.

SAVING SCHEME

Certain factories/establishments are contributing towards the saving scheme for the welfare ofthe workers. Such amount paid by the employer as his contribution to the saving scheme, will notconstitute wages under Sec.2(22) of the ESI Act and the contribution is not payable.(Earlier instructions were issued vide Memo No.P-12/11/4/77-Ins.IV dt. 15.11.80)

ATTENDANCE BONUS

It is a special allowance being paid by certain employers to their employees to discourage theworkers from absenting from the job. Any amount paid by the employer to its employees asAttendance Bonus will constitute wages under Sec.2(22) of the ESI Act and the same opinion washeld by Bombay High court in the case of ESIC Vs. Indian Dyestuff Industries Ltd.. However, the

periodicity aspect has to be kept in mind. In case the periodicity is more than 2 months, thesame will not constitute wages and no contribution will be payable as in the case of incentivebonus.

PAYMENT MADE TO RICKSHAW PULLERS,HATHRAIRY PULLERS AND TRUCK OPERATORS(INCLUDING LOADING & UNLOADING CHARGES WHEN THE LOADERS/UNLOADERS ARE THEEMPLOYEES OF THE TRUCK OPERATORS:

Rickshaw pullers, Hathrairy pullers and Truck Operators (who bring labour with them) nocontribution is payable on the amount paid by the employer if the amount paid is lumpsumamount including loading/un-loading charges and no separate wages are paid by the employer.

Similar view was held by Bombay Division Bench in 1990 in the case of Raisaheb Tekchand,Mohate Mills Vs. R.D. ESIC.

HAMALS/COOLIES EMPLOYED AT A PARTIULAR TIME

Where Hamals & Coolies are employed at a particular place and a particular time, outside thepremises of the factory/establishment to perform a specific job on the spot in such cases nocontribution is payable on the amount paid to such Coolies/Hamals, however the contribution ispayable on the amount paid to the coolies and hamals for services rendered within the premisesof the employer.


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Bombay High Court in the case of Parley Bottling Co.Ltd. VS. ESIC,Bombay

1989 and Supreme Court in the case of ESIC VS.Premier Clay Products, have held this view.

SHORT PERIOD CONTRACT FOR SERVICE ELECTRICIAN, CARPENTERS, MECHANICS, PLUMBERSETC./REPAIR WORK DONE ON SHOP

In such cases also contribution is payable on the amount paid by the Employer if the services arerendered within the premises. This view was also held by Punjab and Haryana High Court vide itsjudgement dated 29.3.84 in the case of Modern Equipment Vs. ESIC in Civil Appeal No.3218 of1989.

EXPENDITURE ON SERVICING OF MACHINES

No contribution is payable on the servicing of machines where the job awarded is to the Engineerand instead of contract of service, there is a contract for service for servicing of machines.

EXPENDITURE ON ANNUAL/PERIODICAL SERVICE CONTRACT

In the factories/establishments certain amount is being paid by the employer to the supplier ofmachines or to the firms of repute for the annual/periodical servicing of the machines and forsuch purposes the contract is awarded. In such cases no contribution is payable on the amountpaid for annual/periodical service contracts.

COMMISSION TO DEALERS/AGENTS:

Where dealers/agents are appointed by the employers but no regular wages are paid and it is notobligatory on the part of such dealers/agents to attend to the factories/ establishments and theyare paid commission only on the quantum of sales, in such cases the amount paid by theemployer as commission/dealership does not constitute wage under Section 2(22) of the ESI Actand hence no contribution is payable.

SERVICE CONTRACT

Amount paid to an organisation for maintenance of Machinery/Equipments as part of servicecontract will not attract ESI contribution.

PAYMENT MADE TO LABOUR CONSULTANTS, LAWYERS, ENGINEERS, COUNSELS, CHARTEREDACCOUNTANTS:

The amount paid by the employer to labour consultants, lawyers, engineers, counsels, charteredaccountants does not constitute wage as per provisions under Section 2(22) of the ESI Act andhence no contribution is payable.

The following items will form part of the wage both under Section 2(9) i.e for considering theemployee for the purpose of coverage and Section 2(22) of the ESI Act for the purpose ofcharging of contribution:-

Matinee allowance which is being paid to employees in Cinema Houses.

Shift allowance paid to employees who work on shift duty at odd shifts.

Location allowance paid, in addition to Dearness Allowance to meet the high house rent.Compensatory allowance.Cash handling allowance paid to Cashier.Supervisory Allowance.

Additional pay paid to training staff.Charge allowanceSteno/Typist allowance


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Plant allowanceHonorarium for looking after the hospital/dispensaryComputer allowanceGestetner/Photocopier/Printer allowance

Personnel/Special allowanceMachine allowanceConvassing allowanceFirst-aid allowancePersonnel allowance Pay over and above the basic wage and Dearness allowance for skill,efficiency or past good records.Area allowance - given to employees living in a particular area to meet the high cost of living in

that area.Exgratia payment if payment is made within an interval of two months.The following items will not form part of the wage either under Section 2(9) or under Section2(22) of the ESI Act:-

Payment made on account of un-availed leave at the time of discharge.Commission on advertisement secured for Newspapers, if not paid to the regular employee.Fuel allowance/Petrol allowanceEntertainment allowance

Shoes allowancePayment made on account of gratuity on discharge/retirement.Payment made on encashment of leave..


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The Minimum Wages Act 1948 Bare Act

4. Minimum rate of wages

(1) Any minimum rate of wages fixed or revised by the appropriate government in

respect of scheduled employments under section 3 may consist of -

(i) a basic rate of wages and a special allowance at a rate to be adjusted at such

intervals and in such manner as the appropriate government may direct to accord as

nearly as practicable with the variation in the cost of living index number applicable

to such workers (hereinafter referred to as the "cost of living allowance"); or

(ii) a basic rate of wages with or without the cost of living allowance and the cash

value of the concessions in respect of suppliers of essential commodities at

concession rates where so authorised; or

(iii) an all-inclusive rate allowing for the basic rate the cost of living allowance and

the cash value of the concessions if any.

(2) The cost of living allowance and the cash value of the concessions in respect of

supplied of essential commodities at concession rate shall be computed by the

competent authority at such intervals and in accordance with such directions as may

be specified or given by the appropriate government.

3. Fixing of minimum rates of wages -


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(1) The appropriate government shall in the manner hereinafter provided -

(a) fix the minimum rates of wages payable to employees employed in anemployment specified in Part I or Part II of the Schedule and in an employmentadded to either Party by notification under section 27 :

Provided that the appropriate government may in respect of employees employed inan employment specified in Part II of the Schedule instead of fixing minimum ratesof wages under this clause for the whole State fix such rates for a part of the State

or for any specified class or classes of such employment in the whole State or partthereof;

(b) review at such intervals as it may think fit such intervals not exceeding five

years the minimum rates of wages so fixed and revise the minimum rates ifnecessary :

Provided that where for any reason the appropriate government has not reviewed

the minimum rates of wages fixed by it in respect of any scheduled employmentwithin any interval of five years nothing contained in this clause shall be deemed toprevent it from reviewing the minimum rates after the expiry of the said period of

five years and revising them if necessary and until they are so revised the minimumrates in force immediately before the expiry of the said period of five years shallcontinue in force.

(1A) Notwithstanding anything contained in sub-section (1) the appropriategovernment may refrain from fixing minimum rates of wages in respect of anyscheduled employment in which there are in the whole State less than one thousandemployees engaged in such employment but if at any time the appropriategovernment comes to a finding after such inquiry as it may make or cause to be

made in this behalf that the number of employees in any scheduled employment inrespect of which it has refrained from fixing minimum rates of wages has risen to

one thousand or more it shall fix minimum rates of wages payable to employees insuch employment as soon as may be after such finding.

(2) The appropriate government may fix -

(a) a minimum rate of wages for time work (hereinafter referred to as "a minimumtime rate");

(b) a minimum rates of wages for piece work (hereinafter referred to as "a minimumpiece rate");

(c) a minimum rate of remuneration to apply in the case of employees employed onpiece work for the purpose of securing to such employees a minimum rate of wageson a time work basis (hereinafter referred to as "a guaranteed time rate");

(d) a minimum rate (whether a time rate or a piece rate) to apply in substitution forthe minimum rate which would otherwise be applicable in respect of overtime workdone by employees (hereinafter referred to as "overtime rate").

(2A) Where in respect of an industrial dispute relating to the rates of wages payableto any of the employees employed in a scheduled employment any proceeding ispending before a Tribunal or National Tribunal under the Industrial Disputes Act1947 (14 of 1947) or before any like authority under any other law for the timebeing in force or an award made by any Tribunal National Tribunal or such authorityis in operation and a notification fixing or revising the minimum rates of wages in


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respect of the scheduled employment is issued during the pendency of suchproceeding or the operation of the award then notwithstanding anything containedin this Act the minimum rates of wages so fixed or so revised shall not apply tothose employees during the period in which the proceeding is pending and theaward made therein is in operation or as the case may be where the notification isissued during the period of operation of an award during that period; and wheresuch proceeding or award relates to the rates of wages payable to all the employees

in the scheduled employment no minimum rates of wages shall be fixed or revisedin respect of that employment during the said period.

(3) In fixing or revising minimum rates of wages under this section -

(a) different minimum rates of wages may be fixed for -

(i) different scheduled employments;

(ii) different classes of work in the same scheduled employment;

(iii) adults adolescents children and apprentices;

(iv) different localities;

(b) minimum rates of wages may be fixed by any one or more of the following wageperiods; namely :

(i) by the hour

(ii) by the day

(iii) by the month or

(iv) by such other larger wage-period as may be prescribed;

and where such rates are fixed by the day or by the month the manner ofcalculating wages for a month or for a day as the case may be may be indicated :

Provided that where any wage-periods have been fixed under section 4 of thePayment of Wages Act 1936 (4 of 1936) minimum wages shall be fixed inaccordance therewith.

The Minimum Wages Act |Laws India
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Minimum Wages Act, 1948

TheMinimum Wages Act, 1948was enacted to safeguard the interests of workers, mostly in

the unorganised sector by providing for the fixation of minimum wages in certain specifiedemployments. It binds the employers to pay their workers the minimum wages fixed under

the Act from time to time.

Under the Act, both the Central Government and the State Governments are the appropriate

Governments to fix, revise, review and enforce the payment of minimum wages to workers in

respect of 'scheduled employments' under their respective jurisdictions. There are 45

scheduled employments in the Central sphere and as many as 1530 in State sphere.

In the Central sphere, the Act is enforced through theCentral Industrial Relations

Machinery (CIRM). CIRM is an attached office of the Ministry of Labour and is also known

as theChief Labour Commissioner (Central) [CLC(C)] Organisation. The CIRM is headedby the Chief Labour Commissioner (Central). While, the State Industrial Relations

Machinery ensures the enforcement of the Act at the State level.

The appropriate Government is required to appoint an Advisory Board for advising it,

generally in the matter of fixing and revising minimum rates of wages. The Central

Government appoints a Central Advisory Board for the purpose of advising the Central and

State Governments in the matters of the fixation and revision of minimum rates of wages as

well as for co-ordinating the work of Advisory Boards.

Minimum wage and an allowance linked to the cost of living index and is to be paid in cash,

though payment of wages fully in kind or partly in kind may be allowed in certain cases. Theminimum rate of wages consists of a basic wage and a special allowance, known as 'Variable

Dearness Allowance (VDA)' linked to the Consumer Price Index Number. The allowance is

revised twice a year, once in April and then in October.

Under theMinimum Wages Act, there are two methods for fixation/revision of minimum

wages, namely:-

Committee method - Under this method, committees and sub-committees are set up

by the appropriate Governments to hold enquiries and make recommendations with

regard to fixation and revision of minimum wages, as the case may be.

Notification method - Under this method, Government proposals are published in the

Official Gazette for information of the persons likely to be affected thereby and

specify a date not less than two months from the date of the notification on which the

proposals will be taken into consideration.

After considering the advice of the Committees/Sub-committees and all the representations

received by the specified date in Notification method, the appropriate Government shall, by

notification in the Official Gazette, fix/revise the minimum wage in respect of the concernedscheduled employment and it shall come into force on expiry of three months from the date
http://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://%20history.go%28-1%29/http://%20history.go%28-1%29/http://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811http://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://labour.nic.in/clc/welcome.htmlhttp://business.gov.in/outerwin.php?id=http://indiacode.nic.in/rspaging.asp?tfnm=194811


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of its issue. The Government may review the minimum rates of wages and revise the

minimum rates at intervals not exceeding five years.

The fixation of minimum wages depends on a number of factors such as level of income and

paying capacity, prices of essential commodities, productivity,local conditions, etc. Since

these factors vary from State to State, the wages accordingly differ throughout the country.Hence, in the absence of a uniform national minimum wage, the Central Government

introduced a 'national floor level minimum wage'. Initially, this minimum wage level was

fixed at Rs. 35/- per day and has been revised periodically. The last revision beingRs. 66/- per

day with effect from 1.2.2004, on the recommendations of the Central Advisory Board. All

the States/UTs Governments are required to ensure that fixation/revision of minimum rates of

wages in all the scheduled employments is not below this national minimum wage.

Also, in order to bring uniformity in the minimum wages of scheduled employments, the

Union Government has requested the States to form regional Committees. Hence, five

Regional Minimum Wages Advisory Committees have been formed in the country. These

include:-

Region States/UTs covered

Eastern Region West Bengal, Orissa, Bihar, Jharkhand and Andaman & NicobarIslands.

North Eastern Region Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Sikkim,Nagaland and Tripura.

Southern Region Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Pondicherry andLakshadwadeep.

Northern Region Punjab, Rajasthan, Himachal Pradesh, Jammu & Kashmir,Haryana, Uttar Pradesh, Uttarakhand, Delhi and Chandigarh.

Western Region Maharashtra, Gujarat, Goa, Madhya Pradesh, Chhattisgarh, Dadra& Nagar Haveli and Daman & Diu.


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15. The Minimum Wages Act, 1948:

Object : The Act provid es for fix ing minim um rates of wages in

certain employments, which are included in the schedule. Applicability : It extends to the whole of India. The Act applies to

the schedule employments for which minimum wages are fixed/revised.

Variable DA is fixed based on Consumer Price Index of theprevious calendar year. Karnataka State annual average of ConsumerPrice Index for Industrial Workers for the calendar year 2005 is 2822,enhancing 119 points from last year (2004) .

Minimum wages are fixed in Karnataka on the advice of the StateLevel Minimum Wages Advisory Board. This Advisory Board isconsisting of the members of both employers and employees and alsoother experts. Commissioner of Labour is the Chairman of theKarnataka State Minimum Wages Advisory Board.

Every employer shall pay the minimum wages for the scheduledemployments under this Act. There is provision to fix hours of work,overtime and wages for overtime.

The claim for non-payment or less payment of minimum wagesnotified by the Government of Karnataka shall be filed before theconcerned jurisdictional Labour Officer. Rules: 1. The Minimum Wages Rules, 1949 (Central Rules, 1950)

applies to whole of India.2. The Minimum Wages (Central Advisory Board) Rules,

1949.3. The Karnataka Minimum Wages Rules, 1958 - applies to the

whole State of Karnataka.

Registers to be maintained under Karnataka Rules:

i) Muster roll-cum-Wages/salary Register in Form XXII

ii ) Overtime register in Form IX

iii) Register of Fines, Deductions and Advances in Form I

iv) Display of notice in form X

v) Wage slip in Form VI to every employee.

Details of addition / fixation / revision effected under the Act:

So far 74 employments have been added to the scheduleunder the Act.

Out of 74, minimum rates of wages have been fixed / revisedfor 71 employments.

For the remaining 3 employment s, the process is going on.


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MINIMUM WAGES ACT 1948THE MINIMUM WAGES ACT, 1948

ACT NO. 11 OF 1948 1*

[15th March, 1948.]

An Act to provide for fixing minimum rates of wages in certainemployments. WHEREAS it is expedient to provide for fixing minimumrates of wages in certain employments; It is hereby enacted as follows:--

Short title and extent.

1. Short title and extent.-(1) This Act may be called the Minimum WagesAct, 1948.

(2) It extends to the whole of India 2***.

Interpretation. 2. Interpretation.- In this Act, unless there is anythingrepugnant in the subject context,-- 3*[(a) "adolescent" means a person whohas completed his fourteenth year of age but has not completed hiseighteenth year; (aa) "adult" means a person who has completed hiseighteenth year of age;] (b) "appropriate Government" means,-- (i) inrelation to any scheduled employment carried on by or under the authorityof the 4*[Central Government or a railway administration], or in relation to amine, oilfield or major port, or any corporation established by 5*[a CentralAct], the Central Government, and (ii) in relation to any other scheduledemployment, the State Government; 6*[(bb) "child" means a person who

has not completed his fourteenth year of age;] (c) "competent authority"means the authority appointed by the appropriate Government bynotification in its Official Gazette to ascertain from time to time the cost ofliving index number applicable to the employees employed in thescheduled employments specified in such notification; --------------------------------------------------------------------- 1. This Act has been extended to Dadraand Nagar Haveli by Reg. 6 of 1963, s. 2 and Sch. I; Pondicherry by Reg. 7of 1963, s. 3 and Sch. I; Laccadive, Minicoy and Amindivi Islands by Reg. 8of 1965, s. 3 and Sch. and Union Territory of Goa, Daman and Diu byNotification No. G.S.R. 436, dated 16-4-1973, Gazette of India, Pt. II, Sec.3(i), p.


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This Act has been amended in Uttar Pradesh by Uttar Pradesh Act 20 of1960 (w.e.f. 1-1-1960). Bihar by Bihar Act 3 of 1961, Maharashtra byMaharashtra Act 10 of 1961, Andhra Pradesh by Andhra Pradesh Act 19 of1961, Gujarat by Gujarat Act 22 of 1961, Madhya Pradesh by Madhya

Pradesh Act 11 of 1959, Kerala by Kerala Act 18 of 1960, Rajasthan byRajasthan Act 4 of 1969, Madhya Pradesh by Madhya Pradesh Act 36 of1976 and Maharashtra by Maharashtra Act 25 of 1976. 2. The words"except the State of Jammu and Kashmir" omitted by Act 51 of 1970, s. 2and Sch. (w.e.f. 1-9-1971). 3. Subs. by Act 61 of 1986, s. 23. 4. Subs. byAct 30 of 1957, s. 2, for "Central Government, by a railway administration".5. Subs. by the A. O. 1950, for "an Act of the Central Legislature".

allowances and minmum wage act

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