COMPLIANCES UNDER LABOUR LAW

By:
Amrik Singh
Sr. Officer (HR)
GAIL (India) Limited

In a Nutshell

Registering
& Licensing
of Existing
and New

Audit of
Contractor /
Vendor

Display of
Abstract
and Notices

Compliances

Compliance
of Labour
Laws

Statutory
obligations
&
Responsibil
ities

Timely
filling of
Statutory
Returns

Maintaining
Statutory
Registers
and Records

Statutory
Challans and
Remittances

WHY COMPLIANCE
MANAGEMENT?
Compliance Management
Framework

Prevent

Policies & Procedure

Risk Assessment
Training & Commitment

Detect

Monitoring
Audit
Ombudsperson

Respond

Investigation
Communication
Improvements

CLAUSE 49 OF THE LISTING AGREEMENT

Provision

Purpose

Compliance
of
all
the Ethical conduct of affairs
applicable legal provisions, Part of Wealth Management
rules & regulation
All Directors and Officers shall take utmost care and pay attention
to comply with all applicable laws, regulations, rules and
regulatory orders in letter and in spirit.
They are also expected to acquire appropriate knowledge of the
requirements relating to their duties sufficient to enable them to
recognize potential dangers and to report to the Board or
management the possible violation of laws and regulations or code
of conduct.

COMPLIANCE UNDER LABOUR LAWS

Statutory compliance under various labour laws has to be
ensured by establishments.

It is not just limited to the statutory deposits, returns and

records to be maintained by the employer under various
labour laws, but also to represent them in case of
prosecution under various statutes.

Major Compliances

 Principal

Employer
has
the
statutory
responsibility on behalf of company to ensure
compliances under Contract Labour (Regulation &
Abolition) Act, 1970 and and Rules framed
thereunder.

Employer

has the statutory responsibility on behalf

of company to ensure compliances under the Shops &
Commercial Establishment Act, 1962 and Rules
framed thereunder.

THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970

&
THE MAHARASHTRA CONTRACT LABOUR (REGULATION AND
ABOLITION) CENTRAL RULES, 1971
Sec 7: Registration

&

Rule 17: Manner of making application for registration:

Apply in Form-I [see rule 17(1)] for registration in triplicate copy
along with prescribed fees
Form-II [see rule 18(1)] : Certificate of Registration
Rule 20: Amendment of Certificate of Registration
[see rule 18(3)] establishment has to intimate changes, if any, within 15
days to the Registering Officer about changes in particulars specified in
the certificate of registration
Penalty: to P.E. or his representative i.e. EIC
Imprisonment of 3 months + fine of Rs. 1000/- + fine of Rs. 100/- per day
(For continuing offence)

Compliance to be ensured by the contractor under

The Contract Labour (Regulation And Abolition) Act, 1970
Apply in Form-IV [see rule 21] for license in triplicate copy along
with license fee [see rule 26] & security [see rule 24] (Refundable)
Application should encloses Form-V which is given by Principal
employer to contractor.

Grant/renewal of license in Form-VI [rule 23&25/29]

After obtaining a License the contractor should submit a copy
to P.E.
Intimation of Commencement/Completion of Contract Work
in Form-VI-A by Contractor [see rule 25(2)-viii]
Legal Penalty to Contractor:
Imprisonment of 3 months + fine of Rs. 1000/- + fine of Rs. 100/per day (For continuing offence

CONTRACT LABOUR (REGULATION AND

ABOLITION) ACT, 1970
Sec 29: Maintenance of registers and other records
Form-VIII - At All times a register of particulars of contract
labour and other records in Form-VIII [see rule 55] as
prescribed
Form-XXI [rule 63(2)] : Annual return in of PE the Registering
Officer before 15th February
Penalty to P.E./His representative on Non Compliance :

Imprisonment of 3 months + fine up to Rs. 1000/-

OBLIGATION OF PRINCIPAL EMPLOYER

Register of contractors

Form-VIII

Certificate by Principal Employer

Form-V

Annual return
(on or before 15th Feb-consolidated return)

Form XXV

Notice of Commencement /Completion

Form VI B
of Work (within 15 days of actual commencement or completion
of work)
Notice under Rule 81(1) showing the rates of wages, wage
period, date of payment of wages, date of payment of unpaid
wages and name and address of Inspectors having jurisdiction
have been displayed in English, in Hindi, or in Marathi in
conspicuous places.
Penalty of Non-Compliance: Imprisonment of 3 months + fine of
Rs. 1000/- (or Both)
+ fine of Rs. 100/- per day (For continuing offence)

OBLIGATION OF CONTRACTOR
Application for License
Form-IV
License
Form-VI
Notice of Commencement /Completion
Form VI A
of Work (within 15 days of actual
commencement or completion of work)
Renewal of license
Form VII
Identity Card
Form X
Display of Act and Rules under rule 60
Muster Roll, Register of Wages, Registers of Overtime, Advances,
Deduction, Fines to be maintained by the Contract under the Payment of
Wages Act and Rules made thereunder or the Minimum Wages Act and
Rules made thereunder if covered under those Act. Otherwise contractor
has to maintain Muster-cum-wage register, attendance-cum-wage slip
under the Maharashtra Minimum Wages Rules, 1963
Penalty of Non-Compliance: Imprisonment of 3 months + fine of Rs.
1000/- (or Both) + fine of Rs. 100/- per day (For continuing offence)

Building and Other Construction

Workers Act 1996
Applies to every establishment which employs or had employed ten or

more workers directly or through a Contractor / Subcontractor In any

Building or Construction work
Not applicable to building or construction work to which Factories
Act, 1948 or Mines Act, 1952 applies
S. No. Particulars

Schedule of submission /
maintenance

Valid BOCW Registration

Within 60 days from the commencement

of the project

Registration of Workers

Worker has an exposure of more than 90

days age limit 18-60 years

Maintenance of BOCW
Beneficiary Register

Daily basis

The BUILDING & OTHER CONSTRUCTION

WORKERS WELFARE CESS ACT , 1996
The purpose is - To collect the Cess on Cost of construction

incurred , for use of the Welfare of Construction workers

who are registered with the respective act.
Cess act prescribes payment of Cess @ 1 %

Documents required for obtaining BOCW Registration

Form-I (Triplicate) i.e. application
Registration fee
PF Challan

Work Order LOI

List of Director
MOA
Pan Card Copy

Payment of Minimum Wages

A minimum wage is the lowest hourly, daily or monthly
remuneration that employers may legally pay to workers.
Minimum wage is the wage that is able to provide not only for
bare physical needs but also for preservation of efficiency of
worker plus some measure of education, health and other things.
The minimum wage must be paid irrespective of the extent of
profits, the financial condition of the establishment or the
availability of workmen at lower wages.
The minimum wage gives employers a guideline as to the legal
minimum amount paid to employees.

Compliances for the Minimum Wages Act, 1948

Sec 12: Payment of minimum rates of wages
Every contractor must pay minimum rates of wages to every contract
employee/worker employed by him in the scheduled employment
Sec 14: Overtime
@ twice the minimum rates of wages for every working hour in
excess the normal working hours
Penalty
Imprisonment for a term upto 6 months or fine which may extend to
Rs.500 or both.
Plus under Contract Labour Act
Imprisonment which may extend to 3 months or fine of Rs. 1000/(or Both)
fine of Rs. 100/- per day (For continuing offence)

Fixation of Minimum Wages

The appropriate government to fix minimum rates of wages in
Scheduled Employment as the provision of The Minimum
Wages Act, 1948
In case of Industry where Central Government is Appropriate
Government, the Minimum wages are fixed by Central
Government.

In case of Industry where State Government is Appropriate

Government, the Minimum wages are fixed by State
Government.
Ministry Of labour and Employment, Govt. of India vide its
Gazette notification, dated September 18,2008 Employment in
Watch and Ward i.e. Security Services has been declared as
Scheduled Employment.

Payment of minimum rate of wages

Minimum Wages are revised half yearly and notified for
a period from Apr-to-Sep and from Oct-to-Mar.
In case rate of Minimum Wages is Different for Sate and
Central, the rate whichever is higher as notified from
time to time as per the city classification should be paid.
Accordingly, We have to revise the rate of Payment to
Contract Workers/Employees.
Its the overall responsibility Principal Employer.

Maintenance of registers and records

Under Sec 18 of the Minimum Wages Act, 1948 and Rule 26 of
the Minimum Wages (Central) Rules, 1950
Muster Roll in Form V
Wage register in Form X

Wage slip to issued in Form XI to the employees

Penalty
Fine which may extend to Rs.500

RESPONSIBILITY FOR PAYMENT OF WAGES

Under Section-12 of Contract Labour (Regulation And Abolition) Act, 1970

(1) A contractor shall be responsible for payment of wages to each worker

employed by him as contract labour and such wages shall be paid before the
expiry of such period as may be prescribed.
(2) Every principal employer shall nominate a representative duly authorized
by him to be present at the time of disbursement of wages by the contractor
and it shall be the duty of such representative to certify the amounts paid as
wages in such manner as may be prescribed.
(3) It shall be the duty of the contractor to ensure the disbursement of wages in
the presence of the authorized representative of the principal employer.
(4) In case the contractor fails to make payment of wages within the prescribed
period or makes short payment, then the principal employer shall be liable
to make payment of wages in full or the unpaid balance due, as the case may
be, to the contract labour employed by the contractor and recover the
amount so paid from the contractor either by deduction from any amount
payable to the contractor under any contract or as a debt payable by the
contractor.

COMPLIANCES UNDER

PAYMENT OF WAGES ACT, 1936

Sec 4 Fixation of wage-periods: wage periods shall not exceeding one month.
Sec 5 Time of Payment of Wages: Before the 7th day after the last day of the
wage period where less than 1000 employees and before 10th day in other
cases.

Sec13-A: Maintenance of registers and records

Details of persons employed, the work performed, wages paid as prescribed
and has not destroyed the same before a period of three years after the date of
last entry made therein.
Bills of the contractor to be passed on the basis of these records
EIC must stamps the register & signs on it.
Legal Penalty: fine between Rs200-1,000 and on subsequent conviction with
imprisonment of not be less than 1 month but which may extend to 6 months
and with fine not be less than Rs.500 but which may extend to Rs.3000.

Comparison of Wages under diff. Acts

Click here
Wages under The Minimum Wages Act, 1948
Wages under The Payment of Wages Act, 1936
Wages under Employees Provident Fund and

Miscellaneous Provisions Act, 1952

Wages under The Minimum Wages Act, 1948
Wages under Contract Labour Act, 1970
Payments considered as Wages under ESI Act

[Click here]

Social Security in India

Article 43 of the Constitution speaks of state's responsibility to

provide social security to the citizens of this country.

Principal Social Security Laws of India
Employees Provident Fund and Miscellaneous Provisions Act, 1952
Employees State Insurance Act, 1948
Workmens Compensation Act, 1923
Maternity Benefit Act, 1961
Payment Gratuity Act, 1972

Employees Provident Fund and

Miscellaneous Provisions Act, 1952
Details information please visit http://www.epfindia.com
The Act aims at providing social security and timely monetary
assistance to industrial employees and their families when they
are in distress and/or unable to meet family and social obligations
and to protect them in old age, disablement, early death of the
bread winner and in some other contingencies.

Employees Provident Fund and

Miscellaneous Provisions Act,
1952

Compliance Management

EMPLOYEES PROVIDENT FUND

SCHEME
EMPLOYEES PENSION SCHEME
EMPLOYEES DEPOSIT LINKED
INSURANCE SCHEME

Rates of Contribution
SCHEME

Provident Fund
Scheme

EMPLOYEES

12%

Insurance
Scheme EDLI

NIL

Pension Scheme

NIL

EMPLOYERS

CENTRAL
GOVTS

(12-8.33) %

Nil

0.5%

Nil

8.33% of Max.
of Rs. 15000/-

1.16%

Additional 1.11% as Administrative Charges by the

Employer

Payment of Contribution
The employer shall pay the contribution payable to the

EPF, and Employees Pension Fund in respect of the

member of the Employees Pension Fund employed by
him directly by or through a contractor.
If a contractor defaults on payment of contributions then

the Principal Employers shall deposit the amount of

contribution alongwith the damage charges and penal
interest for the period of default and recover the same
from the contractor.

PF Compliance
Ensure the compliance of 36-B of The Employees Provident Fund
Scheme, 1952.
36-B. Duties of contractors
Every contractor shall, within 7 days of the close of every month, submit

to the principal employer a statement showing the recoveries of

contributions in respect of employees employed by or through him along
with the copy of challan.
EPFO had Launched an online application for receipt of Electronic

Challan cum Return (ECR) [Clicke here]

EPFO has made it mandatory to submit online return and challan

using e-sewa and eReturn Tool for Employers.

ECR and Online Challan will be accepted as a proof of submission of

contribution by contractors for contract workers employed by him

Role & Responsibility of Contractor

Monthly Returns
Online Filing monthly PF returns with the EPFO within 15 days of

the close of each month, Submit a copy of ECR and Online challan
with Bill
1. Provide list of new employees joined in the establishment during the

preceding month & are qualified to become member in fund (Form-5)

2. Provide list of employees leaving service during the preceding month

(Form-10)
3. Employer should file 'Nil' returns if there is no new employee or no

employee leaving the service during the preceding month

4. Provide the total no. of members last month, new members joined and

existing members resigned in the preceding month & total no. of present
subscribers to be fund
(Form-12A)
ECR serves the purpose of All four Points mentioned above.

Damages

Plus Penal interest on P.F. Dues @ 12%

Penal Provision
Liable to be arrested without warrant being a cognizable

offence.
Defaults by employer in paying contributions or

inspection/administrative attracts damages

charges attract imprisonment upto 3 years and fines upto

Rs.10,000 (S.14).
For any retrospective application, all dues have to be paid by

employer with damages upto 100% of arrears (plus with

penal interest on amount due).
Example: 7-A

Employees
State Insurance Act, 1948
Details information please visit
http://esic.nic.in

Coverage under the ESI Act, 1948

APPLICABILITY

Under Section 2(12) the Act is applicable to non-seasonal factories employing 10

or more persons.
Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels,
restaurants, cinemas including preview theatres, road-motor transport
undertakings and newspaper establishments employing 20* or more persons.
Further under section 1(5) of the Act, the Scheme has been extended to Private
Medical and Educational institutions employing 20* or more persons in certain
States/UTs.
*Note: 14 State Govts. / UTs have reduced the threshold limit for coverage of
shops and other establishments from 20 to 10 or more persons. Remaining
State Governments/UTs are in the process of reducing the same.

The existing wage limit for coverage under the Act is Rs. 15,000/- per
month (w.e.f. 01/05/2010).

ESI Scheme
All employees to insured under the ESI Scheme and provisions of

the Employees' State Insurance Act, 1948

Contribution & Benefit Period

1. Employees Contribution 1.75% of the Wages

2. Employers Contribution 4.75% of the Wages
Contribution towards the scheme on a monthly basis.
Contribution Period
1st April to 30th September
1st October to 31st March

Benefit Period
1st January to 30th June
1st July to 31st Dec.

Half Yearly Return in Form-6

Form-3 Declaration to be submitted in 7 Days of Joining

Employees Benefits under

Employees State Insurance Corporation
Under ESI Scheme, the comprehensive and need based
package of Social Security Benefits in Cash and kind
include the following:
1) Medical Benefit
2) Sickness Benefit
3) Maternity Benefit
4) Disablement Benefit
5) Dependent Benefit
6) Funeral Benefit ( Upto Rs.10000/-)

Principal Employer Vs Immediate Employer

Principal Employer e.g. GAIL
Immediate Employer e.g. Contractor providing security

services

Registration of Employers [Section 2A of the ESI Act]

The first step in the process is the obtaining of particulars about
each coverable factory/shop/establishment, and its identification
by allotment of a number i.e. Code No. by the R. O.
Subsequent step is the registration of employees of covered
factories by the R. O/L. O. and identifying them by allotment of a
number i.e., insurance number, and setting up of necessary
records for recording the benefits for which the insured
employee may be entitled under the Scheme according to
eligibility.

Registration of Employees
Temporary Identification Certificate (TIC): TIC which
is valid for 3 months and can be revalidated till a permanent
Identity Card is issued
2. Permanent Identity Card for Insured Persons (IPs) and a
separate Family Identity Card for families [past practice now
discontinued]
3. Combined Identity Cards (form 4) in place of separate
card for IPs and families [made within 3 months ]
4. Certificate of Employment - If an IP or a member of his
family requires medical care before his TIC is received back
from Ro / SRO / LO, he can obtain a Certificate of
employment from his employer on Form ESIC-86
1.

How to check ESI Compliance

Visit http://www.esic.nic.in and visit the portal for

IP/Employer login on the left side menu

To check compliance in respect of

Employees

To check compliance in respect of

Contractors User Id and Password is
required

The employees Compensation Act 1923

Earlier called as
Workmens Compensation Act 1923
*only if not covered under ESI Act

OBJECTIVES
To provide compensation for workmen in cases of industrial accidents/
occupational diseases resulting in disablement or death.
COVERAGE
Persons employed in factories, mines, plantations, railways and other
establishments mentioned in Schedule II of the Act.
It does not include those in clerical capacity, in railways factories,
mines, plantations, mechanically propelled vehicles, loading and
unloading work on a ship, construction, maintenance and repairs of
roads and bridges, electricity generation, cinemas, catching or trading
of wild elephants, circus, and other hazardous occupations
ELIGIBLITY
The benefits are payable in respect of work-related injuries to the
workers dependents not covered by the ESI Act.

Workmen's Compensation Act, 1923 or

Employees' Compensation Act 1923
If not covered under ESI Act
Employers Liability : To pay compensation to the employee on
death or personal injury, resulting into total or partial disablement or
occupational disease, caused to an employee arising out of and during
the course of employment.
All Employees to be Ensured
Amount of Compensation
In case of Death = 50% of the monthly wages of the deceased workman
multiplied
by
the
relevant
factor
or
an
amount
of
Rs. 1,20,000/-, whichever is more.
In case of permanent total disablement = 60% of the monthly wages of
the injured workman multiplied by the relevant factor or an amount of
Rs. 1,40,000/-, whichever is more.

Liability Calculation:
Employees/ Workmen's Compensation
Act
Maximum Liability = (60 % of Rs. 8000/-) X
(Relevant
Factor 226.38) at 18 Years of Age
= Rs. 10,86,624.00/The Contractor must have to obtain Employees/Workmen
Compensation Insurance Policy with the above value as sum
assured for extending legitimate social security benefits in case of
miss-happening during the tenure of contract.

The Payment of Bonus Act, 1965

Section 8: Eligibility for bonus- Every employee shall be
entitled to be paid by his employer in an accounting year,
bonus, in accordance with the provisions of this Act, provided
he has worked in the establishment for not less than thirty
working days in that year.
Section10: Payment of minimum bonus- a minimum bonus
which shall be 8.33% of the salary or wage earned by the
employee during the accounting year or one hundred rupees,
whichever is higher, whether or not the employer has any
allocable surplus in the accounting year

The Payment of Bonus Act, 1965

Section 11: Payment of maximum bonusa maximum of 20%
Section 11: Payment of maximum bonus- All amounts payable
to an employee by way of bonus under this Act shall be paid
in cash by the employer.
(a) Where there is a dispute regarding payment of bonus
pending before any authority under Sec.22, within a
month from the date on which the award becomes
enforceable or the settlement comes into operation, in
respect of such dispute;
(b) In any other case, within a period of eight months
from the close of the accounting year

Maternity Benefit Act, 1961

OBJECTIVES
To provide for Maternity protection before and after
child birth.

Applicability to every factory or establishment in

which 10 or more persons are or were employed on
any day of the preceding twelve months.

Eligibility for Maternity Benefit: Has to work for 80

days in the preceding 12 months immediately
preceding the date of her expected delivery.

The Maternity Benefit Act, 1961

There is no wage limit for coverage provided the woman is not

covered by the ESI Act.

Eligible for 12 weeks maternity benefit of which not more than

six weeks shall precede the date of her expected delivery.

Maternity benefit is paid at the rate of the average daily wage

for the period of her actual absence. The average daily wage
means the average of the womans wages payable to her for
the days on which she has worked during the period of three
calendar months immediately preceding the date from which
she absents herself.

The Maternity Benefit Act, 1961

Where a woman has delivered a child and dies during her delivery
or during the period immediately following the date of her
delivery for which she is entitled for the maternity benefit, leaving
behind in either case the child, the employer shall be liable for the
maternity benefit for that entire period but if the child also dies
during the said period, then for the days upto and including the
date of the death of the Child.
6 weeks leave with wages for tubectomy and two weks
immediately following the day of an tubectomy.
Nursing breaks Two times in the course of daily work till the
child attains 15 months.
Prohibition from dismissal for absence during pregnancy.
However, for Misconducts, forfeiting of Maternity Benefit and
Medical bonus permissible.

Payment of Gratuity Act,

1972

OBJECTIVES
To provide for payment of gratuity on ceasing to hold office.
It is payable at the time of termination of his services either
on superannuation
on retirement or resignation
on death or disablement due to accident or disease
retrenchment.

COVERAGE: Factories, mines, oil-fields, plantations, railway

companies, shops and establishments and also to other
establishments to which the law is extended
ELIGIBLITY : Five year continuous service is required for entitlement
of gratuity.
BENEFITS
15 days wages for every completed year of service or part thereof in
excess of 6 months subject to a maximum of Rs.10,00,000/-.
The seasonal employees are entitled to gratuity at a rate of 7 days
wage for each season.

DEATH GRATUITY
(1) Gratuity shall be payable to an employee on the termination of his employment after he
has rendered continuous service for not less than five years, - (a) on his superannuation, or
(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease : Provided that the completion of
continuous service of five years shall not be necessary where the termination of the
employment of any employee is due to death or disablement :
Provided further that in the case of death of the employee, gratuity payable to him shall be
paid to his nominee or, if no nomination has been made, to his heirs, and where any such
nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling
authority who shall invest the same for the benefit of such minor in such bank or other
financial institution, as may be prescribed, until such minor attains majority.

Gratuity will be payable only on the cases of death during the currency of contract
and will be reimbursed to the contractor on submission of copy of proof on
disbursement of gratuity.

What minimum an HR, F&A executive

should so?
Take Copy of Labour License from Contractor before start

working with contract labour

Obtain PF Code and Check PF Compliance on EPFO
portal
Obtain EIC Code, if applicable and Check ESI Compliance
on ESIC portal
Obtain a copy of Insurance under WC/EC Act, if ESI is not
applicable.
Ensure Attendance register & Salary Register with salary
slip of Contract labourer available with the company
(Minimum wages to be paid )

What minimum an HR, F&A executive

should so?
Take copies of PF/ESIC paid challans from Contractor &

preserve them for future departmental Audit ( As a

principle employer if contractor does not pay then
company will be liable)
Maintain Labour License Expiry register of all contractor
working in the company to avoid legal obligations on
organization

How to resolve such issues, avoid their

occurrence and ensure compliances
HR Manager / HR Executive is responsible for ensuring

all compliances related to Labour Laws

HR Manager/ HR Executive has to ensure compliances

assigned to him and provide necessary information &

assistance to EIC
Dealing Manager or Engineer In-charge has to ensure

compliances related to Payment of Wages, Minimum

Wages, PF Deduction, Bonus, Maternity, etc.

What happens in the event of

Non-Compliance?
Fines
Penalties
Lawsuit
Loss of credibility
Loss of contract
Show cause notice to Directors / CMD
Closure of business
Future business

Concept of fair wages

Sr.
No.

Component of Wages and Social Security

Quantum

Basic Wages (A) = Minimum Wages as notified by the Central or State

Government whichever is higher

Contribution towards EPF/EPS/EDLI and Admn. Charges

@13.61% of A

Contribution towards ESI or Policy under Employees Compensation

Act 1923 (incase ESIC non applicable)

@4.75% of A*
+Rate at Sl.No.8

Leave with wages (8 CL + 3 Gazetted Holiday+ 4 Festival Holiday + 15

Privileged/Earned Leave)

@8.33% of A

Uniform/ Safety Kits

@6% of A

Annual Bonus

@8.33% of A

Payment of Gratuity on Death

@ 4.81% of A

Compensatory Off/ Overtime

@14.4% of A

Displacement Allowance (ISMW ACT)

10

Journey Allowance [ISMW ACT]

4 x [50% of
A(twice)]
Sleeper Train
Fare

Definition of Wages under The Minimum

Wages Act, 1948
wages means all remuneration capable of being expressed in terms of

money which would if the terms of the contract 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 and includes
house rent allowance but does not include

the value of - (a) any house accommodation supply of light water

medical attendance or (b) any other amenity or any service excluded by

general or special order of the appropriate government;
any contribution paid by the employer to any person fund or provident
fund or under any scheme of social insurance;
any traveling allowance or the value of any traveling concession;
any sum paid to the person employed to defray special expenses entailed
on him by the nature of his employment; or
any gratuity payable on discharge;

Definition of Wages under The Payment of

Wages Act, 1936
wages means all remuneration (whether by way of salary 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 by payable to a person
employed in respect of his employment or of work done in such employment and
includes
(a) any remuneration payable under any award or settlement between the parties or
order of a court;
(b) any remuneration to which the person employed is entitled in respect of overtime
work or holidays or any leave period;
(c) any additional remuneration payable under the terms of employment (whether
called a bonus or by any other name);
(d) any sum which by reason of the termination of employment of the person
employed is payable under any law contract or instrument which provides for the
payment of such sum whether with or without deductions but does not provide for
the time within which the payment is to be made;
(e) any sum to which the person employed is entitled under any scheme framed
under any law for the time being in force, but does not include [continued]

[continued] but does not include

(1) any bonus (whether under a scheme of profit sharing or otherwise)
which does not form part of the remuneration payable under the terms
of employment or which is not payable under any award or settlement
between the parties or order of a court;
(2) the value of any house-accommodation or of the supply of light
water medical attendance or other amenity or of any service excluded
from the computation of wages by a general or special order of the State
Government;
(3) any contribution paid by the employer to any pension or provident
fund and the interest which may have accrued thereon;
(4) any travelling allowance or the value of any travelling concession;
(5) any sum paid to the employed person to defray special expenses
entailed on him by the nature of his employment; or
(6) any gratuity payable on the termination of employment in cases
other than those specified in sub-clause (d).

Definition of Wages under Employees Provident

Fund and Miscellaneous Provisions Act, 1952
basic wages means all emoluments which are earned by an
employee while on duty or on leave or on holidays with wages in
either case in accordance with the terms of the contract of
employment and which are paid or payable in cash to him but
does not include :
(i) the cash value of any food concession;
(ii) any dearness allowance (that is to say all cash payments by
whatever name called paid to an employee on account of a rise in
the cost of living) house-rent allowance overtime allowance
bonus commission or any other similar allowance payable to the
employee in respect of his employment or of work done in such
employment;
(iii) any presents made by the employer;

Definition of Wages under ESI Act

wages means all remuneration paid or payable in cash to an
employee, if the terms of the contract of employment, express or
implied, were fulfilled and includes any payment to an employee in
respect of any period of authorised leave, lock-out, strike which is not
illegal or layoff and] other additional remuneration, if any, paid at
intervals not exceeding two months], but does not include
(a) any contribution paid by the employer to any pension fund or
provident fund, or under this Act ;
(b) any travelling allowance or the value of any travelling concession ;
(c) any sum paid to the person employed to defray special expenses
entailed on him by the nature of his employment ; or
(d) any gratuity payable on discharge ;

Definition of Wages under Contract

Labour Act, 1970
wages shall have the meaning assigned to it in clause (vi)
of section 2 of the Payment of Wages Act, 1936 (4 of 1936)
Payments considered as Wages under ESI Act
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Payments considered as Wages under ESI Act

WAGES

NOT WAGES

a) Suspension Allowance/Subsistence Allowance a) Washing allowance if the sum is paid

is wages
to defray special expenses entailed by the
nature of employment is not wages.
b) Overtime allowance is wages for payment of b) Annual Bonus is not wages if the
contribution only but not for determination of periodicity of the payments is more than
employee u/s 2(9) of the Act.
2 months.
c) Inam is wages when it is paid for special skill c) Incentive Bonus: Incentive Bonus is
or higher responsibilities or where the employer not wages if the periodicity of the
has no right to withdraw or revise it
payments is more than 2 months.
d) 'Lay Off' pay is wages.

d) Production Bonus is not wages

provided periodicity of the payment is
more than 2 months.

Payments considered as Wages under ESI Act

WAGES

NOT WAGES

e) House Rent Allowance is wages.

e) Inam is not wages where the employer

has right to withdraw at his discretion
and where there is 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 and the periodicity
of payment is beyond 2 months.

f) Night Shift/Heat/Gas/Dust Allowance is f) Annual Commission is not wages.

wages.
g) Conveyance Allowance is wages which arises g) Service Charges is not wages when it
out of contract of employment from 1.4.02 as per is collected as tips.
Hqrs. letter dated 21.3.02

Payments considered as Wages under ESI Act

WAGES

NOT WAGES

h) Medical Allowance is wages when it is not re- h)

Salary
drawn
imbursed.
proprietor/partners and
himself.

by
the
contractor

i) Newspaper Allowance is wages when it is not i) Ex-gratia payment in lieu of annual

re-imbursed.
bonus
j) Education Allowance is wages when it is not j) Payment made
re-imbursed.
Scheme is not wage

k) Drivers Allowance is wages.

towards

Saving

k) Hamalies or collies employed at a

particular time outside factory premises
are not employee.

Payments considered as Wages under ESI Act

WAGES

NOT WAGES

l) Food, Meal, Tiffin and Lunch allowance is L) Expenditure on annual servicing of

wages when it arises out of contractual machines (contract for service), no
agreement.
contribution payable.
m) Gazetted Allowance is wages

m) Commission to Dealers/Agents, no
contribution payable

n) Wages and Dearness Allowance for un- n) Payment made to institutions having
substituted holidays is wages
separate legal entity no contribution
payable
o) Interim Relief is wages.

o) Service Contract with organization for

annual maintenance of machinery /
equipments as part of service contract
will not attract ESI contribution.

Payments considered as Wages under ESI Act

WAGES

NOT WAGES

p) Attendance Bonus is wages provided the p) Payment made to the Lawyers,

periodicity is not more than 2 months
Engineers, Counselor and Chartered
Accountant is not wages.
q) Hamalies or collies at a particular time in the q) Payment made to Rickshwaw-pullers,
premises of the employer is employee and Hathairy pullers and truck operators
contribution is payable.
(including loading and unloading charges
when the loaders / unloaders are the
employee and truck operators are not
employee u/s 2(9) and no contribution
is payable.

Payments considered as Wages under ESI Act

WAGES

NOT WAGES

r) Short period contract for service electrician,

carpenters, plumbers, repair work if the work is
done within the factory premises, contribution is
payable in respect of employees.

r) The following items will not form part

of wage either for the purposes of u/s.
2(9) or u/s 2(22) of the ESI Act.
1) Payment made on account of
unavailed leave at the time of discharge
(2) Commission on advertisement
secured for newspaper if not paid to the
regular employees (3) Fuel Allowance /
Petrol Allowance (4) Entertainment
Allowance (5) Shoes Allowance (6)
Payment made on account of gratuity /
discharge / retirement (7) Payment
made on encashment of leave.

Payments considered as Wages under ESI Act

WAGES
s) The following items may be considered as Wages :- (1) Matinee allowance paid to the
cinema employee (2) Shift allowance (3) Location allowance paid in addition to D.A. to
meet the high house rent (4) Compensatory allowance (5) Cash handling allowance paid to
Cashier (6) Supervisory allowance (7)Additional pay paid to training staff (8) Charge
allowance (9) Steno/typist allowance (10) Plant allowance (11) Computer allowance (12)
Gestetner/Photo copies/printers allowance (13) Personal /special allowance (14) Machine
allowance (15) Canvassing allowance (16) First aid allowance (17) Personal allowance for
skill, efficiency or past good records (18) Area allowance for high cost living (19) Ex-gratia
payment
if
payment
is
made
within
an
interval
of
2
months.
(20) Conveyance all w.e.f. 01.04.02 (21) Food/Tiffin/Meal all w.e.f. 06.05.03
Coverage of workers engaged by the outside agencies / job contractors in connection with
the work of the principal employer outside the premises. For the purpose of verification
and inspection, the details in respect of these employers/ employees should be furnished
by the Principal Employer in proforma prescribed in Annexure-I.

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