Confused About ESIC Deductions and Salary Contributions? Let's Discuss Your Concerns

Salary and ESIC Deduction Inquiry

My CTC is 7500, and the basic is 7143. From my salary, 125 (1.75% of 7143) is deducted, and 356 (4.75% of 7500) is included in my CTC. Hence, 7500 - 356 = 7143 is my basic that I receive. Is the above calculation correct?

Now, my salary will be 10,500 Rs. Could you please tell me if I will be exempted from ESIC deduction or not?

Clarification on Salary Deductions

Another question: I am contributing 1.75% of my salary for benefits, and 4.75% is being deducted from my salary. Why should the company benefit even though both contributions are from my salary? I am very confused about this. Please reply as soon as possible.

You can also email me at [Email Removed For Privacy Reasons].

Thanks in advance.

Dear Jitendra Tomar,

This is not the correct way to calculate CTC. If your salary in CTC is Rs. 7500, only 1.75% will be deducted from your salary, and the remaining 4.75% will be provided by the employer. Your (gross or basic) salary will be Rs. 7368.

If you encounter any issues, please contact me at 9313353831.

Thank you.

Hi, thanks for reaching out. Your number is not working, and I am still confused. I am providing my details as per my salary slip:

Salary Details

My CTC is 7500/month, with a basic salary of 7143. The deductions are as follows:
- PT: 80
- GMC: 530
- ESIC: 125 (1.75% of 7143)

My Net amount is calculated as Basic - (PT + GMC + ESIC), which equals:
7143 - (80 + 530 + 125) = 6408

Is the above calculation correct?

CTC Structure Concerns

The CTC structure they provide is 7143 + 356 (4.75% of 7500) = 7500/month. However, both deductions are taken from my salary. 1.75% is deducted from my basic, while 4.75% is included in the CTC. I feel like something is wrong. Please help me.

Dear Ketan, You are totally under the wrong calculation. CTC (Cost to Company) is based on components like basic, HRA, CA, DA, CCA, medical allowance, leave travel expenses, bonus, and PF, including everything you have benefitted from. Therefore, ESI deduction will be deducted from the gross salary only, not from the CTC amount. For example, if your gross salary is Rs. 12,000/-, then your ESI deduction from your gross salary would be Rs. 210/- (1.75%), and the employer's share would be Rs. 570/-.

Note: The ESIC wage limit was increased from Rs. 10,000 to Rs. 15,000, effective from 01.05.2010.

Thank you, Devi. As per your example, in my case, what is happening is that 1.75% of the basic amount is being deducted, and 4.75% of the CTC is also getting deducted from my salary. They have calculated the CTC by adding the gross and the Employer's ESIC (4.75%), like this: Basic + Employer's ESIC = CTC.

According to your comment, I should only pay 1.25% of the gross amount, correct? However, in my current salary structure:

CTC: 7500
BASIC: 7143 -> (7500 - 356) (356 = 4.75% Empl. ESIC)
DEDUCTION: 125 (1.75% of Employee contribution)

Isn't this calculation incorrect? Ultimately, I am paying both 1.75% and 4.75%. Is the limit calculated based on the basic (gross) amount or the CTC? Please, can you clarify this for me?

I appreciate your response in advance. Thank you.

Dear Ketan,

As explained to you by other seniors, CTC means the Cost to the Company, which is the cost incurred by the company for an employee. According to ESIC rules, the total ESIC deduction is 6.5%, of which 1.75% is the employee's share and 4.75% is the employer's share. Both these amounts are part of the cost to the company, hence considered in your CTC.

A similar case applies to PF (12% each from the Employee & Employer). I hope this clears your doubts now.

Thank you,
Chandrakant

ESI Contribution Exemption Update

As your salary is above the ₹10,000 mark, you are currently exempt from ESI contribution. Please wait. Now, the exemption limit of ESI has been increased from ₹10,000 to ₹15,000. The date of implementation is not yet known, but it is likely to be from 01.04.2010. In that case, you will be under ESI and liable for a contribution at the rate of 1.75% of your gross salary.

Thanks,
R. Srinivasan

Dear Ketan, The ESI has enhanced the wage limit under the Act from ₹10,000 to ₹15,000 w.e.f. May 1, 2010. So, you will need to pay the ESI contribution. ESI is attempting to improve its image, but the performance has been far from satisfactory. If an employee can contribute the same amount that he pays under the ESIC, he could obtain better medical coverage under any general insurance company. It is time that employers impressed the government on the performance of this white elephant.

Regards, Vincent

My dear friends, according to the notification dated 20th April 2010 issued by the Ministry of Labour and Employment, coverage under Employees' State Insurance (Central) (Amendment) Rules 2010 is being increased from Rs. 10,000/- to Rs. 15,000/-. This shall come into force from the 1st day of May, 2010 (and not from 1st April 2010). This means the ESIC amount will be deducted from May 2010 wages and is to be paid in June 2010. (Kindly note the first payment as per the new scheme will be in the month of June 2010 and not in May 2010.) A copy of the notification is attached herewith for your reference.

Sincerely,
Prithvi Pal Singh

Dear Ketan, Please do not confuse between salary and CTC. As has been brought out, CTC is the cost to the company, which means how much you are costing the company. This includes Basic Pay, HRA, Food subsidy (if any), conveyance (if provided), Employer's contribution to PF, Employer's contribution to ESI, and any other money that the company is incurring on you.

As per the Employee's State Insurance Act, the employee's share is 1.75% of Basic pay, and the employer's share is 4.75% of basic pay.

In your case, the basic pay has been fixed at Rs 7143/-. All other allowances mentioned above, which constitute CTC, are additional. The employer's share of ESI is CTC, but it is notional as this is not to be paid to the employer in cash. This has to be deposited with ESI authorities. You will get the benefits of ESI based on your contribution, i.e., 1.75% of your basic salary and the employer's contribution, which is 4.75% of your basic salary.

The calculation by the company is correct.

I hope this clears the confusion.

Regards

Dear Kethan,

Please see the notification regarding the ESI limit effective from 01.05.2010.

Murali

Is This Your Payslip?

My CTC is 7500 per month. My Basic is 7143. Deductions are as follows:
- PT: 80
- GMC: 530
- ESIC: 125 (1.75% of 7143)

Therefore, my Net amount is calculated as Basic - (PT + GMC + ESIC), i.e., 7143 - (80 + 530 + 125) = 6408. Is the above calculation correct?

The CTC structure they provide is 7143 + 356 (4.75% of 7500) = 7500 per month. However, this calculation is incorrect. An employer can include the employer's contribution for PF in your CTC. They can add the employer's contribution of PF (12%) in your CTC. CTC stands for the cost to the company, which is a benefit for you, and you can withdraw that amount. On the other hand, you cannot withdraw the ESIC amount. Your actual gross amount is 7143.

Thank you.