Blog

In ESIC v Texamo Industries, the Hon’ble Supreme Court of India has held that conveyance allowance paid to employees would not be a wage aa defined under Section 2(22) of the ESIC Act.

The Apex court however added a Caveat that If an employee does not have to incur any expenditure on travel, in that case conveyance allowance would be a wage.

“23. Conveyance Allowance may or may not be payable to every employee. For that matter, House Rent Allowance may also not be paid to all employees. It is immaterial whether an allowance is paid regularly or intermittently depending on exigencies. It is the nature and purpose of the allowance which is relevant.

24. House Rent Allowance cannot possibly be equated to Conveyance Allowance, since House Rent Allowance is not necessarily connected with the employment of an employee. Irrespective of whether a person is employed or not and irrespective of the nature of his employment, he needs shelter.

25. Conveyance Allowance, on the other hand, compensates expenses that might be incurred by an employee for reporting to his usual place of work or to any other place of work, where he may have to report. If an employer were to provide the employee with accommodation within walking distance from his place of work and that employee were not required to go to any other place in connection with his duties under his contract of employment, the employee may not have to incur any expenditure in connection with his employment. In such a case, Conveyance Allowance would be redundant and might be construed as part of allowance consisting wages. In this case, it is not the case of the Corporation that the employees concerned did not need to avail any conveyance expenditure to report for duty to their place of work, or otherwise in connection with their duties under their contracts of employment. Nor is there any such finding. We see no reason why Conveyance Allowance should not be excluded from the definition of wages. ”

Copy of the judgement is attached