Confused About PF and ESIC Contributions in CTC Calculation? Need Your Advice!

Dear All,

I have a query related to PF in the salary structure. The salary break is as follows:

Part A: Basic + HRA + LTA + Other Allowance + Medical + Other Components

Part B: PF (Employer Contribution) + ESIC (Employer Contribution)

Part C: PF (Employer Contribution @ 12%) + ESIC (Employee Contribution @ 1.5%) + TDS + Professional Tax + Group Insurance + Other Components

Now, CTC is: PART A + B - C, where A + B refers to Gross and A + B - C is Take-home.

Now, I am unable to understand whether in Part B PF and ESIC (both employer contributions) should be considered as 12% or 13.61% (12% + 0.5% + 1.1%) for PF and ESIC 5% (4.5% + 0.5%) to calculate CTC.

Kindly give suggestions.

Thanks in advance,

Regards,
Pradyumna

Clarification on CTC Components

Part B will consist of CTC PF 12% Employer Share and ESIC 4.75% Employer Share. The cost of administration of the scheme, if any (PFR & ESIC), is not for any particular employee, so it can't be part of CTC for any employee.

Be clear.

Regards,
P K Mishra

Thank you for the solution. Could you please answer another question, "How is the basic fixed?" and a question pertaining to the above CTC structure - is the breakup correct in CTC?

Regards,
Pradyumna

Understanding CTC and Employer Contributions

CTC stands for Cost to the Company, so all the costs that the employer has to bear in providing employment constitute a part of CTC. Therefore, in Part B, you should consider 13.61% for PF and so on.

Regards,

Hi,

Please, can anybody tell me if a company is managing its own PF account, which includes the whole employee's contribution (12%) and 3.67% of the employer's contribution, and the rest 8.33% of the employer's contribution is submitted to PF authorities. Is this procedure legally correct? If yes, then how will an employee receive their 8.33%?

Thank you.

Hello,

PF 12% & ESIC 4.75% are part of the CTC as both parts are contributed by the employer. The employer does not take administrative costs from the employee for PF. Secondly, the PF is divided into 2 parts, i.e., PF & Pension. In PF, {12% (Employee) + 3.67% (Employer) = 13.67%}, whereas in Pension, 8.33% (Employer) is submitted to every employee's account. At the time of withdrawal, PF authorities issue 2 separate cheques for both PF & Pension.

Furthermore, in some companies, LTA, Medical, Bonus, Personal Accident, Mediclaim & Gratuity costs are also part of CTC. As a standard practice, Basic constitutes 40% of the total CTC.

Thanks,
SG

Hi,

We agree with Mr. NK Tiwari's arguments. Jyotsna, could you clarify whether the PF at your company is managed by a trust?

Thank you.

Can anyone help me to clear my confusion on the above threads? As per my knowledge:

Gross Salary Calculation

Gross (Basic + HRA + LTA + Other Allowance + Medical + Other Components)
- Deduction (PF + TDS)
= Take-home
+ Company contribution (PF and any other)
= CTC.

Let me know if I am wrong.

Regards,
Rita

Dear Jyoti,

Yes, this procedure is legally right as the company is managing its own EPF trust in which 12% + 3.67% is kept with the employer, and the EPS share of 8.33% has to be deposited with EPFO. For withdrawal of the same, you have to simply fill Form 10C of EPS duly attested by the employer and submit the same to the concerned EPFO office.

Thanks & regards,

From,

Sumit Kumar Saxena,

+91-9899669071, 0120-4131277

For the calculation of CTC, you have to consider 13.61% of EPF share and 4.75% of ESIC share. Please let me know what 0.5% in ESIC refers to.

Thanks & Regards,

Sumit Kumar Saxena

[Phone Number Removed For Privacy Reasons], [Phone Number Removed For Privacy Reasons]

Basic pay is fixed based on the following criteria:
1) Minimum wages
2) It should be on average 40% of Gross
3) It depends on company policy; mostly companies with fair practices have a grade-wise structure. If not, it can be fixed through negotiation in the case of a fresh appointment.
4) Basic pay should never be less than the prevailing minimum wages.

P K MISHRA

Dear,

IT IS EASY.

PART A = GROSS SALARY.

PART A + PART B = COST TO THE COMPANY, WHERE THE EMPLOYEE GROSS SALARY COMPANY WILL CONTRIBUTE. SO, GROSS SALARY + EMPLOYER CONTRIBUTION = CTC.

PART A - PART C = EMPLOYEE TAKE-HOME SALARY, WHERE THE EMPLOYEE HAS TO CONTRIBUTE FOR PF AND ESIC. SO, OUT OF HIS GROSS SALARY, PF AND ESIC ARE DEDUCTED.

MITESH MAKWANA H.R. 9723511033

Dear IT IS EASY.

PART A = GROSS SALARY. PART A + PART B = COST TO THE COMPANY WHERE IN EMPLOYEE GROSS SALARY COMPANY WILL CONTRIBUTE. SO, GROSS SALARY + EMPLOYER CONTRIBUTION = CTC.

PART A - PART C = EMPLOYEE TAKE-HOME SALARY WHERE THE EMPLOYEE HAS TO CONTRIBUTE FOR PF AND ESIC, SO OUT OF HIS GROSS SALARY PF AND ESIC ARE DEDUCTED.

MITESH MAKWANA H.R. 9723511033

Salary Breakdown is as follows:

Part A: Basic + HRA + LTA + Other Allowances + Medical + Other Components

Part B: PF (Employer Contribution) + ESIC (Employer Contribution)

Part C: PF (Employee Contribution @ 12%) + ESIC (Employee Contribution @ 1.75%) + TDS + Professional Tax + Group Insurance + Other Components

PART A is ONLY GROSS SALARY

PART A + PART B = CTC

AND PART A - PART C = EMPLOYEE TAKE-HOME SALARY

FURTHERMORE, FOR PF CONTRIBUTION FROM THE EMPLOYER SIDE, IT IS 13.61%, AND FOR ESIC, IT IS 4.75%

Regards,
MITESH MAKWANA