In the case of the employer as and when the employer finds the need to have work done expeditiously, in addition to the normal work during the course of the working hours, the employer 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 emerges concluded implied contract between the employer and the employee. Both the remuneration received during the working hours and overtime constitutes a composite wage and thereby it is a wage within the meaning of Sec.2(22) of the ESI Act. Therefore, the contribution is payable on the overtime allowance. However, overtime allowances will be considered as wage for the purpose of charging the contribution only and will not be considered for the purpose of the coverage 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 case of 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).
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 settlement entered into between the Management and its workmen and hence are wages within the meaning of Sec.2(22) of the ESI Act. This view was observed by the Full Bench of Karnataka High Court in the case of NGEF Ltd. Vs. Dy.Regional Director, ESIC, Bangalore. Supreme Court in the case of M/s.Harihar Polyfibers Vs. RD ESIC, Bangalore has also held the same view. Hence, Night Shift Allowance, Heat, Gas & Dust allowance are wages under Sec.2(22) of the ESI Act and contribution 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 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 also being paid to the employees in the nature of conveyance allowance, which is neither wages for the purpose of coverage of employees under Sec.2(9), nor it is treated as wages for the payment of 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 that conveyance 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 are collected by management of the hotel on behalf of their employees in lieu of direct 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 ESI Act. In the case of ESIC Vs. M/s.Rambagh Palace Hotel, Jaipur, the High Court of Jaipur has held that ‘service charges’ are not wages under Section 2(22) of the ESI Act. This verdict of the High Court of Jaipur was accepted in the ESIC and hence no contribution is payable on ‘service charges.
(Earlier instructions were issued vide letter No.P-12/11/4/79-Ins.Desk.I dt. 18.9.79)
WAGES AND DEARNESS ALLOWANCE FOR UNSUBSTITUTED HOLIDAYS:
Such wages and dearness allowance paid to the employees for the unsubstituted holidays are to be 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.