ESI Circular on Conveyance allowance not a part of Wages

ESIC has issued an internal circular instructing that the conveyance allowance shall not form part of the wages of the employee as per the Hon'ble Supreme Court's judgment.

In the case of ESIC Vs. Texmo Industries (special leave petition (c) No.811/2021) it is decided that ESI contribution is not attracted towards the conveyance allowance or travelling allowance paid to the employees. Conveyance allowance will not cease to be a travelling allowance only because a fixed sum was paid along with wages as per the terms of the contract of employment and it is immaterial whether the allowance is paid regularly or intermittently depending upon the exigencies. The nature of the allowance and the purpose of the allowance are relevant.

ESIC has decided to implement the judgment from the date on which it was delivered by the Court i.e. 08 March 2021. Therefore, the conveyance allowance and travelling allowance need not be included for the purpose of ESI contribution from this date.

Also refer to https://www.greythr.com/notifications/conveyance-allowance-not-a-part-of-wages-to-compute-esi-contribution/

Related Acts
  • ESI Act

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