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

Pradyumna
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
P.K.Mishra
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
Pradyumna
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
NKTiwari
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,
jyotisna
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.
saurabhgoswami11
Understanding PF and ESIC Contributions in CTC

PF at 12% and ESIC at 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 two parts: PF and 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 two separate cheques for both PF and Pension.

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

Thanks,
SG
Anurag Jain
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.
ritachichole
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
sumitk.saxena
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,

Sumit Kumar Saxena

[Phone Number Removed For Privacy Reasons], [Phone Number Removed For Privacy Reasons]
sumitk.saxena
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]

MITESH MAKWANA
Understanding Salary Components

It is easy.

Part A: Gross Salary

Part A + Part B: Cost to the Company (CTC)
Where the employee's gross salary includes the company's contribution. So, Gross Salary + Employer Contribution = CTC.

Part A - Part C: Employee Take-Home Salary
Here, the employee has to contribute to PF and ESIC. So, out of the gross salary, PF and ESIC are deducted.

Regards,
Mitesh Makwana H.R. [Phone Number Removed For Privacy Reasons]
MITESH MAKWANA
Understanding Salary Components

Part A = Gross Salary. Part A + Part B = Cost to the Company (CTC) where the employee's gross salary includes the company's contribution. Therefore, Gross Salary + Employer Contribution = CTC.

Part A - Part C = Employee Take-home Salary, where the employee has to contribute to PF and ESIC. Thus, PF and ESIC are deducted from the gross salary.

Regards,
Mitesh Makwana
H.R.
[Phone Number Removed For Privacy Reasons]
MITESH MAKWANA
Salary Breakdown

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

Clarifications

- PART A is ONLY GROSS SALARY
- PART A + PART B = CTC
- 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
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