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Querry on ESI

(Querist) 29 May 2008 This query is : Resolved 
What is meant by Notional Wages under ESI Act?


BALAJI R (Querist) 29 May 2008
H. S. Thukral (Expert) 30 May 2008
ESI contribution is payable on monthly wage at the time of contribution period. Wages of daily wagers or piece rated employees are converted into a notional monthly wage on the basis of number of days worked and the payment recieved. It is a estimated monthly wage in simple language.
BALAJI R (Querist) 31 May 2008
Dear Sir,

Thank your clarification.

Is there any case law to substantiate that it is estimated wage?

Because, i understand from one of my friend in Tamilnadu that ESI Inspectorate is telling that you have to take only Basic and DA alone for determining ESI coverage i.e within Rs.10,000/- or more. Is it like that?

If not so, is there any earlier judgements available for this?

Pls clarify.

Best Regards,

H. S. Thukral (Expert) 31 May 2008
The definition of Wages in ESI Act covers all remuneration payable provided in the terms of employment.
You can refer to Modella Woolens Mills v Director ESI 1994(3)SCC 580 where bonus paid to employees is included in wages. However the earning beyond contract terms is not included in wages. In a recent case SC has held that the service charges collected by management of a hotel and distributed among the staff would not form wages in terms of the definition.
V.Raghavan (Expert) 05 August 2008
for the purpose of coverage u/s 2(9) of ESI Act
Dear Balaji
The amount of wages (excluding remuneration for O.T.) being fixed by the employer as "wage" for a month may be considered for deciding coverage of the monthly rated (time rated) employees while the coverage of other categories may be decided on the basis of "Notional Wage" earned by the employee. It means the consolidated earning of the month
can be taken for calculation when there are stipulated or undetermined amount of wages

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