Hello everyone,
Would like to clear one query as ESIC of 6.5% (4.75%+1.75%) are being calculated on Gross salary or CTC?
Secondly does gross salary stand as CTC - Employer PF ESIC & LWF deduction?
Kindly clarify it.

From India, New Delhi

Dear ESIC must be calculate on Gross Salary. Gross Salary stands for earning salary of employee without any deduction like PF, ESIC. CTC = cost to company (All legal expenses of an employee)
From United Arab Emirates, Dubai
Dear Sir,
Thanks for clearing the queries.
But unfortunately I am not cleared with my second question yet.As Gross salary means including employee's EPF and ESIC contribution and excluding of employer EPF, ESIC and other statutory compliance?
Kindly clear out.

From India, New Delhi

As CTC word says itself Cost to Company.
CTC includes = PF & ESIC (Employee + Employer), Bonus, EL Encasement + Gratuity. these are normally comes under CTC, its depend on company policy what expenses they will include in CTC, which they spend on an individual employee.
Gross Salary includes = PF & ESIC contribution of employee.
Hope your query is clear now.

From United Arab Emirates, Dubai
Asso.Prof.(Commerce & Management)

Let us be clear. Gross salary is Gross salary, it's nothing to do with CTC. For the purpose of recovery from the employee's salary, the Gross salary should include the Basic, DA & other allowances paid/payable in cash. See the following details -

The term “wages” has been defined u/s 2(22) of the Act in three parts as under:-

1. All remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled.

2. and includes any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or lay of.

3. and other additional remuneration, if any paid at intervals not exceeding 2 months.

However, it does not include:-

a. any contribution paid by the employer to any pension fund or provident fund or under ESI Act,

b. any traveling allowance or the value of any traveling concession,

c. any sum paid to the person employed to defray the special expenses entitled to him by the nature of his employment or

d. any gratuity payable on discharge.

In order to ascertain as to whether the expenditure incurred by the employers comes under section 2(22) of the ESI Act,


a) Suspension Allowance/Subsistence Allowance is wages a) Washing allowance – if the sum is paid to defray special expenses entailed by the nature of employment is not wages.

b) Overtime allowance is wages for payment of contribution only but not for determination of employee’ u/s 2(9) of the Act. b) Annual Bonus is not wages if the periodicity of the payments is more than 2 months.

c) Inam is wages when it is paid for special skill or higher responsibilities or where the employer has no right to withdraw or revise it c) Incentive Bonus: Incentive Bonus is not wages if the periodicity of the payments is more than 2 months.

d) 'Lay Off' pay is wages. d) Production Bonus is not wages provided periodicity of the payment is more than 2 months.

e) House Rent Allowance is wages. e) Inam is not wages where the employer has right to withdraw at his discretion and where there is scheme of ‘Inam’ in writing but still employer might be making payment under the head ‘Inam’ on the basis of some understanding between the parties and the periodicity of payment is beyond 2 months.

f) Night Shift/Heat/Gas/Dust Allowance is wages. f) ‘Annual Commission’ is not wages.

g) ‘Conveyance Allowance’ is wages which arises out of contract of employment from 1.4.02 as per Hqrs. letter dated 21.3.02 g) ‘Service Charges’ is not wages when it is collected as tips.

h) Medical Allowance is wages when it is not re-imbursed. h) Salary drawn by the proprietor/partners and contractor himself.

i) Newspaper Allowance is wages when it is not re-imbursed. i) Ex-gratia payment in lieu of annual bonus

j) Education Allowance’ is wages when it is not re-imbursed. j) Payment made towards “Saving Scheme” is not wage

k) ‘Drivers Allowance’ is wages. k) Hamalies or collies employed at a particular time outside factory premises are not employee.

l) Food, Meal, Tiffin and Lunch allowance is wages when it arises out of contractual


L) Expenditure on annual servicing of machines (contract for service), no contribution payable.

m) ‘Gazetted Allowance’ is wages m) Commission to Dealers/Agents, no contribution payable

n) ‘Wages’ and Dearness Allowance’ for un-substituted holidays is wages n) Payment made to institutions having separate legal entity no contribution payable

o) Interim Relief is wages. o) Service Contract with organization for annual maintenance of machinery / equipments as part of service contract will not attract ESI contribution.

p) Attendance Bonus is wages provided the periodicity is not more than 2 months p) Payment made to the Lawyers, Engineers, Counselor and Chartered Accountant is not wages.

q) Hamalies or collies at a particular time in the premises of the employer is ‘employee’ and contribution is payable. q) Payment made to Rickshwaw-pullers, Hathairy pullers and truck operators (including loading and unloading charges when the loaders / unloaders are the employee and truck operators are not employee’ u/s 2(9) and no contribution is payable.

r) Short period contract for service – electrician, carpenters, plumbers, repair work if the work is done within the factory premises, contribution is payable in respect of employees. r) The following items will not form part of wage either for the purposes of u/s. 2(9) or u/s 2(22) of the ESI Act.

1) Payment made on account of unavailed leave at the time of discharge (2) Commission on advertisement secured for newspaper if not paid to the regular employees (3) Fuel Allowance / Petrol Allowance (4) Entertainment Allowance (5) Shoes Allowance (6) Payment made on account of gratuity / discharge / retirement (7) Payment made on encashment of leave.

s) The following items may be considered as ‘Wages’ :- (1) Matinee allowance paid to the cinema employee (2) Shift allowance (3) Location allowance paid in addition to D.A. to meet the high house rent (4) Compensatory allowance (5) Cash handling allowance paid to Cashier (6) Supervisory allowance (7)Additional pay paid to training staff (8) Charge allowance (9) Steno/typist allowance (10) Plant allowance (11) Computer allowance (12) Gestetner/Photo copies/printers allowance (13) Personal /special allowance (14) Machine allowance (15) Canvassing allowance (16) First aid allowance (17) Personal allowance for skill, efficiency or past good records (18) Area allowance for high cost living (19) Ex-gratia payment if payment is made within an interval of 2 months.

(20) Conveyance all w.e.f. 01.04.02 (21) Food/Tiffin/Meal all w.e.f. 06.05.03

Coverage of workers engaged by the outside agencies / job contractors in connection with the work of the principal employer outside the premises. For the purpose of verification and inspection, the details in respect of these employers/ employees should be furnished by the Principal Employer in proforma prescribed in Annexure-I.

(pl.see the attachment for proper tabulation)

From India, Bangalore

Attached Files
File Type: docx Wages - Definition.docx (16.8 KB, 84 views)

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