Confused About ESIC Deductions on My Salary: Why Am I Covered and How Does It Work?

Hi,

I'm Eva. I have a query regarding the deduction and wage ceiling under ESIC. I have joined my current job in November 2006, while the offer letter was given in October. I was offered a package of 1.25 lacs per annum, which comes to 10,417 per month. The breakup is as follows:

- Basic: 5000
- HRA: 2000
- Medical allowance: 445
- PF: 12% of basic i.e. 600
- SA: 2372

However, when I got my first salary, there was no medical allowance included. Instead, ESIC was deducted from my salary, including both employees' and employers' contributions, i.e., 1.75% and 4.75%, respectively.

As per my knowledge, the updated wage ceiling for ESIC is 10,000. Can anyone help me with the solution? Why have I been covered under ESIC? Please reply back.

Thank you.

Eva,

Firstly, I would like to tell you that even though the company has given you a package of Rs. 1.25 per annum i.e. Rs. 10,417/- per month, the terminology for a package in terms of the company is CTC - Cost to Company. In this way, your gross salary would become less than Rs. 10,000/- per month.

CTC includes gross salary, PF (employer contribution), and in some companies ESIC (employer contribution). Actually, it is not a problem with the company because during Oct-06, the ESIC range of Rs. 10,000/- was not fully finalized.

Santosh Iyer
santosh_iyer79@rediffmail.com

Hi Niti,

Your salary break-up shows that your monthly salary amounts to Rs. 9372. The medical allowance will be provided on a yearly basis and will be included in the CTC. You can claim this medical allowance as per your company's policy at any time.

ESI will be covered up to the salary limit of Rs. 10,000/- For this, you should have filled out a Declaration form. I think I should have explained in more detail. If you have any further queries, please feel free to email me back.

Regards,
Caroline.

Hi Manish,

Please clarify for me that the range of ESIC has now been increased to Rs. 10,000/- from the previous amount of Rs. 6,500/-. Isn't that correct?

Could you please help clear my doubts on this matter?

Regards,
Manish

Thanks, Caroline,

Are you sure I can claim the medical anytime? As informed by HR, once an employee is covered under ESIC, the company cannot give a medical allowance. Also, I would like to let you know that all my other colleagues receive the medical allowance monthly.

Eva,

Sorry to tell you this, but it is true. As I mentioned earlier, the company provides the salary package in CTC. The components included in the CTC depend on the company's policies.

I hope this clarifies things for you.

Santosh Iyer
Email: santosh_iyer79@rediffmail.com

Dear Eva,

The company offered you a CTC of Rs. 1.25 lakh per annum, including medical benefits, which is your annual package. Your monthly package is less than Rs. 10,000, resulting in earnings per month. Therefore, you are automatically covered under ESIC. Regarding Medical reimbursement, you can claim your eligible amount by providing medical expenses receipts after completing your probation period.

For any further queries, please feel free to contact me via my Yahoo email address: nileshchudiwal@yahoo.com.

With warm regards,
Nilesh P. Chudiwal

Hi EVA,

My name is Rakesh Kumar Sharma from Gurgaon. Please review the attached file. I believe it may help you clear your query.

Regards,
Rakesh Kumar Sharma
9810680048

Hi Eva,

The ceiling limit for ESI has been increased recently from Rs. 7500 to Rs. 10000. Let me first know what your gross salary is. ESI is deducted from a person's salary if their gross salary falls below Rs. 10001. If yes, you become a member of it by default by law.

In your case, you said 10400+ is your monthly salary. If it is net/gross salary, then you do not fall under the ESI bracket. If it's your CTC, please find out the gross salary and refer to the above information.

You can always ask the HR representative to explain it to you. Confusion in the first payslip is common to arise.

Regards,
Deepak. M

Hey, can anyone tell me if there is a supplementary allowance, then is there a deduction of fringe benefit tax (FBT)? What are the conditions for FBT, and is it reimbursed back to us on investments? Please guide.

Affectionate Eva,

I went through your question. Please be informed that in your case, your CTC is below Rs. 10,000. Other queries are enumerated below.

ESI - The ceiling for deduction of ESI is Rs. 10,000, w.e.f. 1st October 2006. But the limit refers to basic salary + DA only. In your case, it is Rs. 5,000, hence you are eligible to get the benefit of ESI and it's good for you. But in no way can the company deduct the Employer's share of contribution (4.75%) from your salary. It's the liability on the part of employers as per the statute of 'ESIC'. You can ask the concerned authority, or else you can register a complaint with the ESICorporation on their website.

In case you need further clarification, please feel free to write to me at jpn@spanconsult.com.

:lol:

Hi EVA,

Rakesh Kumar Sharma here again. I believe that in your case, the company has already calculated the ESI employer contribution of 4.75% in your CTC as Medical, i.e., Rs. 445. Kindly refer to the attachment I have forwarded to you.

Regards,
Rakesh Kumar Sharma
9810680048

Hi Eva,

Quite a discussion generated. I tend to agree with Rakesh that the 4.75% employer's share is the medical benefit mentioned in your CTC. If you are covered under ESI, I do not see any reason for the company to pay you a medical allowance. However, I also feel that the company has played dirty (a personal viewpoint) by not explaining the breakup in detail.

Now, look at the flip side - ESI is a terrific benefit. I would strongly recommend that you use it to your advantage. I do not know the state of affairs of ESI in Gujarat, but in Gurgaon, we have availed its benefits to a terrific advantage. I calculated the amount we paid and also the approximate amount we would have claimed. The claimed amount was just over double the subscription. I guess you could try and triple the amount.

All the best,
Ajay