Interpretation of Conveyance Allowance in ESI Act

In a recent legal case, the court examined the critical question of whether Conveyance Allowance falls under the definition of ‘wages’ as per the ESI Act. The case explored the nuanced distinction between Conveyance Allowance and Travelling Allowance, emphasizing the importance of interpreting the law in favor of employee welfare. The court’s analysis delved into the specific provisions of the ESI Act and previous judgments to determine the treatment of Conveyance Allowance within the ambit of wages. Let’s unravel the complexities of this legal debate.


  • Respondent Company remitted Rs.9,89,783/- towards the difference in wages as per the ESI Act.
  • Employees of the Respondent Company are required to be insured as per the ESI Act.
  • Respondent Company instituted proceedings in the E.S.I.O.P No.1 of 2016 regarding the Corporation’s claim of Rs.9,48,517/- for Conveyance Allowance.
  • The Employees’ State Insurance Court allowed the E.S.I.O.P No.1 of 2016 and set aside the claim for Conveyance Allowance.
  • The Respondent Company disputed the claim, stating that certain components did not constitute wages under Section 2(22) of the ESI Act.
  • A subsequent amended order determined the differential contribution payable by the Respondent Company at Rs.19,38,300/-.
  • The Corporation filed an appeal in the High Court, which was dismissed, upholding the Employees State Insurance Court’s decision.

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  • The specific issue in this Special Leave Petition is whether ‘wages’ as defined in Section 2(22) of the ESI Act includes Conveyance Allowance paid by the Respondent Company to its employees.

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  • Conveyance allowance paid in cash for travel from residence to work is regarded as travelling allowance under Section 2(22)(b) of the Employees’ State Insurance Act.
  • Travelling allowance and the value of travelling concession are expressly excluded from the definition of wages.
  • Any payment made to reimburse or compensate for special expenses due to the nature of employment is not considered as wages.
  • Section 2(22) of the ESI Act defines wages as remuneration paid in cash to an employee under a contract of employment.
  • Wages include remuneration for discharging duties and obligations, payment during authorized leave, lock-out, strike, or lay-off, and additional remuneration at intervals not exceeding two months.
  • The definition of wages specifically excludes employer contributions to pension or provident funds, travelling allowances, compensatory sums for special employment-related expenses, and gratuity upon discharge.
  • The distinction between Travelling Allowance and Conveyance Allowance is misconceived.
  • Conveyance Allowance compensates for expenses incurred to report to work.
  • Travel is an expression with a wide meaning, including long distances.
  • The nature and purpose of the allowance are relevant in determining if it should be included in wages.
  • Travelling Allowance is excluded from the definition of wages in Section 2(22) of the ESI Act.
  • There is no restriction on the scope and ambit of Travelling Allowance in the ESI Act or the ID Act.
  • Conveyance Allowance may be redundant and could be construed as part of wages.
  • Conveyance Allowance compensates for the process of taking somebody from one place to another.
  • Conveyance Allowance is considered to be within the definition of wages when paid under the terms of settlement and as part of the contract of employment.
  • Conveyance Allowance is akin to Travelling Allowance and serves the purpose of enabling employees to reach their workplace and cover travel costs.
  • Payment of Conveyance Allowance every month as per the contract of employment does not disqualify it from being considered a Travelling Allowance.
  • The exclusion of Conveyance Allowance from the definition of wages is justified based on the specific provision for travelling allowance or the value of any travelling concession.
  • Judgments have upheld the view that Conveyance Allowance is to be treated as Travelling Allowance and excluded from wages for the purpose of ESI benefits.
  • In cases where there is ambiguity, the interpretation favoring the welfare of the employees is preferred under the ESI Act.
  • The Madras High Court has consistently ruled in favor of excluding Conveyance Allowance from wages as it falls under Travelling Allowance.
  • The exception clauses in the ESI Act clarify that any Travelling Allowance or travelling concession value is outside the scope of ‘wages.’

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  • Special Leave Petition dismissed
  • Reasons for dismissal not provided in the context given


Case Number: SLP(C) No.-000811 / 2021

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