PF & ESI deduction on notice pay
Palak Lotiya
(Querist) 14 December 2009
This query is : Resolved
Hello Experts,
I raised this discussion in the forum but have received contracting replies can aanyone guide me regarding this as to whether notice pay attracts PF & ESI deductions.
If possible please provide supporting judgements to your reply.
Thanks
Raj Kumar Makkad
(Expert) 14 December 2009
Yes. Notice period attracts PF & ESI Deductions.
H. S. Thukral
(Expert) 14 December 2009
Dear Palak
To arrive at an answer we have to see definitions of salary/wages in both the Act
Section 2 EPF &MP Act
(b) "basic wages" means all emoluments which are earned by an employee while on duty or [4] [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-
Section 2 Employees State Insurance Act
22) "wages" means all remuneration paid or payable in cash lo an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes [27] [any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay-off and] other additional remuneration, if any, [28] [paid at intervals not exceeding two months], but does not include-
From the above it is clear that the notice pay is paid to an employee for which he does not have to perform any duty. Considering the definition of Wage in RPF Act it is not a wage as it is not earned by the employee while on duty. EPF is not payable on this.
However in the ESI Act the definition is very wide and include all remuneration and in the amended act it includes compensation for lay off though it is not salary/wage under the ID Act. Therefore ESI contribution is payable.
Palak Lotiya
(Querist) 15 December 2009
Thank you All,
I require a judgement that supports this point if anyone can provide the same.
Regards
H. S. Thukral
(Expert) 15 December 2009
Pl refer to forum discussion
A.R.KUPPUSAMI
(Expert) 16 December 2009
Notice pay is a pay paid/payable liable to deduct contribution. To an employee under ESI/EPF Act clearly define that any amount paid/payable to an employee for his service/work it is wages. Notice pay is a pay paid/payable for a particular timelimit liable for remittance. Act is clear.
