ESIC vide circular No. T-11/13/56/02/2020 Rev.II has acknowledged to all regional and sub-regional offices regarding the judgment of the Hon’ble Supreme Court of India that payment of conveyance allowance as per the present case does not fall under the definition of term “wages” which 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 authorized leave, lock-out, a 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 traveling allowance or the value of any traveling 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”.

Therefore, concluded that conveyance allowance shall not form part of the wages of the employees and the judgment hold good with effect from 8th March 2021. Please refer to the circular and enclosed judgment for more details.

Our Views

ESIC Circular: Honorable Supreme Court Decision on Conveyance in ESIC v/s Texmo Industries

The Circular issued by the ESI Corporation, which is attached along with is contradictory. They have made Conveyance Exempt from the 8th of March 2021, which is the date of the Supreme Court Order. The Supreme Court cannot amend the law but can throw clarity on the law and therefore the clarity comes in effect from the time the ESI Act, 1948 (As amended) was enacted.

Conveyance is not a wage that has been determined by the Honorable Supreme Court and this position is now accepted by the ESI Corporation.

Now, the establishment is left with 2 options.

Option 1

Exempt Conveyance as a wage, this will lower the contribution of the existing employees but also bring fresh employees, whose gross including conveyance was higher than Rs. 21000.00, into the coverage of the ESIC as their gross after deduction of conveyance may be less than Rs. 21000.00. This will be an expensive proposition for the employer.

Option 2

Merge Conveyance with Special allowance or Supplementary Allowance or any other allowance being paid monthly. Delete the word Conveyance from the nomenclature. This will maintain the status quo. There will be no change in the contribution values and no new employee will fall under coverage.

Our recommendation is to proceed with Option 2.

ESIC vide circular No.P-11/12/Misc./1/2019 (M)- Rev.II has acknowledged to regional directors and sub-regional offices that employee state insurance contribution for the month of October 2021 can be remitted up to 30th November 2021 instead of 15th November 2021 and return of contribution for the period of April 2021 to September 2021 may be filed up to 15th December 2021 instead of 11th November 2021 on account of system breakdown in information technology system. Therefore, employers may take note of the directions and comply accordingly. Please refer to the notification for more details