Confused About ESIC Deduction in Salary? Let's Figure It Out Together

Hi all,

I have one general question about ESIC deduction in a salary annexure.

Basic: 4000
HRA: 2000
Special allowance: 2000
PF: 480 (included in package)

CTC total = 8480

If employee incentive starts at Rs. 2500, then her total cash in hand salary will be 8000 + 2500 = 10500.

What amount of ESIC can be deducted?

Please solve it; I am so confused.

Hi Sunrosesan,

I think your Annexure is not clear. What is 2500? Is this an incentive? You remember drawing a wage up to 10000; that's enough. Then ESI will be deducted, incentive amount will be deducted from ESIC. If I am wrong, anyone, please correct me. My ID is subrahmanyamp@yahoo.com.

Regards,
Subrahmanyam

ESIC is deducted in 2 quarters, i.e., April to Sept and Oct to Mar. You have not mentioned when your incentive starts. If it starts from April onwards and your total earnings are more than 10000 according to government norms, then you are not eligible for ESIC.

Regards, Milind

Hi,

"Incentive" is not a fixed remuneration; it varies with performance, hence, it is eligible for ESI deduction. Only gross salary is considered for deductions, not CTC. Therefore, the PF contribution of the employer is not taken into account when calculating ESI. If the gross salary is less than 10,000/-, then ESI is applicable. In case there is a hike in the gross pay above Rs 10,000/- per month, then ESI deduction should continue until the contributory period is over. For example, if there is a hike in May, the deduction shall continue until September, and from October onward, there won't be any ESI deduction.

I hope this is clear now.

Regards,
Prabhakar Rao. M