When a workman is placed under Suspension pending Enquiry as a part of disciplinary action, we pay Subsistence Allowance as per the Act during such suspension period. Do we have to deduct ESI, PF & Labour Welfare Fund contributions from such Subsistence Allowance payable.
From India, Madras
10From India, Madras
Dear Ranganathan,
Contribution to ESI is alike insurance premium. The Supreme Court had already held in Regional Director, ESIC v Popular Automobiles Ltd [ AIR 1997 SC 3956 ] that a suspended employee and his employer are liable to remit ESI contributions from the subsistence allowance paid. Quoting the ratio decidendi of the above judgment, the ESIC also issued clarification treating subsistence allowance as wages as defined u/s 2(22) of the ESI Act,1948.
But, under the EPF Act,1952 subsistence allowance is not treated as wages. Hence no need to deduct EPF contribution for the period of suspension pending enquiry.
Contribution to Labor Welfare Fund should not be deducted from the subsistence allowance as it is not wages.
From India, Salem
Contribution to ESI is alike insurance premium. The Supreme Court had already held in Regional Director, ESIC v Popular Automobiles Ltd [ AIR 1997 SC 3956 ] that a suspended employee and his employer are liable to remit ESI contributions from the subsistence allowance paid. Quoting the ratio decidendi of the above judgment, the ESIC also issued clarification treating subsistence allowance as wages as defined u/s 2(22) of the ESI Act,1948.
But, under the EPF Act,1952 subsistence allowance is not treated as wages. Hence no need to deduct EPF contribution for the period of suspension pending enquiry.
Contribution to Labor Welfare Fund should not be deducted from the subsistence allowance as it is not wages.
From India, Salem
I would like to add that treatment of subsistence allowance as wages still remains an issue of unresolved controversy because of two schools of thought based on the interpretation of the concept of wages w.r.t the contract of employment.
One view is that wages is the consideration either monetary or capable of being expressed in terms of money payable by the employer after fulfilment of the terms of the contract by the employee. But during suspension, the employee is not allowed to work and therefore he loses the right to wages.
The counter point is that the contract of employment still subsists during the entire phase of suspension and the non-performance of work by the employee is not voluntary or willful but simply imposed only by the employer. Therefore, subsistence allowance shall also be treated as wages.
My personal view is that the very name " subsistence allowance " indicates that it is only an allowance to keep the employee to survive and enable to defend himself against the charges imputed against him. At the end of the day, if he is exonerated or awarded any punishment other than dismissal, he is going to be paid his normal wages after adjusting the subsistence allowance received so far. In this back drop, for the purpose of deductions towards certain obligations under law the failure of which for the time being is not going to deprive him of certain benefits out of such contribution, they need not be effected from the subsistence allowance.
From India, Salem
One view is that wages is the consideration either monetary or capable of being expressed in terms of money payable by the employer after fulfilment of the terms of the contract by the employee. But during suspension, the employee is not allowed to work and therefore he loses the right to wages.
The counter point is that the contract of employment still subsists during the entire phase of suspension and the non-performance of work by the employee is not voluntary or willful but simply imposed only by the employer. Therefore, subsistence allowance shall also be treated as wages.
My personal view is that the very name " subsistence allowance " indicates that it is only an allowance to keep the employee to survive and enable to defend himself against the charges imputed against him. At the end of the day, if he is exonerated or awarded any punishment other than dismissal, he is going to be paid his normal wages after adjusting the subsistence allowance received so far. In this back drop, for the purpose of deductions towards certain obligations under law the failure of which for the time being is not going to deprive him of certain benefits out of such contribution, they need not be effected from the subsistence allowance.
From India, Salem
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SC directive on subsistence allowance to suspended staff.doc