SC: Conveyance Allowance Is Equivalent To A Travelling Allowance And Is An Excluded Component Of Wages For ESI Contribution  

Case: Talema Electronic India Private Limited v Regional Director, ESI Corporation [Civil Appeal Number 3175 of 2022]

Summary  

This case was filed against the decision of the High Court of Judicature at Madras in C.M.A.No.643/2020 which overturned an ESI Court decision that had previously declared that wages for ESI Act do not include ‘conveyance allowance’. The employer was dissatisfied and preferred an appeal before the Supreme Court (SC).   

The SC held that ‘conveyance allowance’ is equivalent to ‘traveling allowance’ and since ‘traveling allowance’ is excluded from the definition of ‘wages’ under the Employees’ State Insurance Act, 1948 (ESI Act), any conveyance allowance will also be excluded from the said definition.  

Issue Raised  

Whether wage payable to the employee would include conveyance allowance within its scope?  

Judgement  

The SC has held that ‘conveyance allowance’ is equivalent to travelling allowance and thus excluded from the definition of ‘wages’ under the ESI Act while placing reliance on the case of Employees State Insurance Corporation v. Texmo Industries, wherein it was held that that ‘conveyance allowance’ is equivalent to ‘travelling allowance,’ and thus, since ‘travelling allowance’ is excluded from the definition of ‘wages’ under the Employees’ State Insurance Act, 1948 (ESI Act), any conveyance allowance will also be excluded from the said definition.  

Analysis  

Section 2(22) of the ESI Act defines ‘wages’ as all remuneration paid or payable in cash to an employee, under a contract of employment, express or implied, as consideration for discharging their duties and obligations under such contract of employment, which includes payments made to employees in connection with authorized leaves of absence, lockouts, legal strikes, layoffs, and other additional compensation paid at intervals not exceeding two months. The employer’s contributions to a pension or provident funds, contributions made under the ESI Act, travel reimbursements, the value of travel discounts, and gratuity are specifically excluded under this section.  

Thus, a conveyance allowance is a type of travel allowance to allow the employee to get to work and defray travel expenditures from their residence to their place of employment. Hence, any travelling allowance or the value of any travelling concession would fall beyond the scope of the term ‘wages’.