Confused About Salary Deductions: Why Is My Employer's Contribution Taken from My Pay?

Hi, I just started working, and this month, I received my salary. There is great confusion as both the employee and employer contributions are deducted from my salary. I want to know why they have deducted the employer's contribution from my salary.

Understanding CTC and Take-Home Salary

My CTC is 15,000 per month. Please tell me what should be my take-home.

Regards

Please review your appointment letter and CTC classification. Many companies include both contributions under CTC.

Pon

Payslip Components and Amounts

Please put up the Payslip component and amounts here:

Earnings
1
2
3
4
5
TOTAL

Deductions
1
2
3
4
5
TOTAL

Salary Break-up

Here is my salary break-up:

- Basic: 6232
- HRA: 3116
- Conveyance: 1246
- Medical: 1246
- Other: 1246
- LTA: 519

Deductions

- PF: 748
- ESI: 238

My CTC is 15000.

It is correct, my friend. 12% of Basic, i.e., Rs. 6232, is Rs. 748, which is the employee contribution. The employer contribution is separate, my friend 

Your salary breakup and CTC are correct. The Basic is 30% of the CTC, PF is 12% on the Basic, and HRA is 40% on the Basic. I think you are clear now.

Understanding Salary Deductions

Example: CTC—15000. The basic will differ from state to state. As per Hyderabad, the basic is 40% of CTC. Therefore, 40% of CTC amounts to 6000. From 6000, deduct 12% for the employer's contributions, which equals 720. So, 15000 - 720 = 14280. Your gross salary is 14280.

From the gross amount, your contribution of 12% will be deducted, along with professional tax and ESI (applicable for salaries below 15700/-). LTA depends on individual interest.

Regards

Hi Parul, as Pon suggested, many companies have this practice of deducting both the employee and employer share from the CTC. However, these things should be discussed at the time of negotiations. I have been telling many people the same: during negotiation, they should be aware of their compensation package and deductions, as it can affect their take-home salary. Try talking to HR again, and if possible, request them for renegotiation, i.e., increasing the CTC by the amount they will be deducting as the employer share. It is possible.

Understanding Salary Components

Please try to understand the difference between Net Salary, Gross Salary, and CTC. Your Employer PF, Employer ESI, Bonus, approximate & confirmed Ex-gratia per annum, LTC/LTA, everything is considered as a cost to the Company. In Gross, the above will not be there, but all the deductions will be available. Net Salary is the emolument that you carry home.

Thank you.

Understanding PF Contributions

A company's contribution to PF should be 12% of Basic + DA. Out of this, 8.33% will go to EPS (maximum Rs 542). The company should contribute on its own, and it should not be deducted from the employee's salary. However, CTC is the cost to the company for anyone's employment, and it includes all the contributions made by the company on behalf of the employee. The terms of appointment should also be considered.

Regards,
Sandip Sengupta

Bhaskar is right. The calculation of CTC includes all costs that the company is bearing at the end of the month/year. Basically, it is just a matter of understanding. We need to understand net salary, gross salary, and CTC.

Best Regards,
Moin

Your CTC is ₹15,000/-. Understanding CTC

CTC means Cost to Company. There is a difference between Gross Salary and CTC. In Gross Salary, you earn what you actually receive, whereas in CTC, it represents the total Cost to Company.

Regards