Is It Fair for Employers to Deduct Their ESIC Share from Our Salary? Let's Discuss

I am working with one company, and the issue is that when we were all given the Appointment Letter, we received the package in CTC. Now, the company authorities deduct the Employer's share of ESIC from our salary. Can they do this? When we all asked for the reason, they explained the same reason. Can you all help me out?

Regards,
Ramesh

Dear Ramesh, According to the law, the employer should pay the employer's share of ESIC. However, many companies make deductions from the employee's side. Therefore, before getting employed, you should inquire about the complete salary breakdown, including all deductions, and what your take-home salary would be.

Kind Regards,
Bhawani Singh

Understanding Salary Components

CTC - This means the company's total expenditure on you, inclusive of all kinds of employer's contributions.

Gross Salary - Gross salary is your actual salary, inclusive of the employee's contributions towards ESIC, EPF, Professional Tax, Income Tax, etc.

Net Salary - Net salary is what you get in hand after deductions of the employee's share of ESIC, EPF, Professional Tax, Income Tax, etc.

Hope things are clear to you.

Regards,
Kamal

The statement below is fully correct as per the company law. ESI Employers' contribution must be written after the Gross Earnings in the offer agreement letter. This means that the company is paying on your behalf, but this is also a cost for the company, and as a company, they need to show it in the books of accounts.

For more details, feel free to call us at [Phone Number Removed For Privacy Reasons] or email me at [Email Removed For Privacy Reasons].

Employer's Contribution and ESI Act Compliance

The company may be showing it in CTC, but it is not permissible under the ESI Act to deduct the employer's contribution from the wages of the employee. Such action invites penal measures under the Act.

Regards,
B. Saikumar
Mumbai

I agree with the view expressed by Kamal. The employer's contribution to ESI is the cost incurred by the company on the employee, and the employer is right in including it in the CTC. It is outside the gross pay, but it is definitely a part of CTC.

Understanding CTC and Wages

CTC and wages are two different heads for calculating an employee's benefits and compensation entitlement. Wages, roughly, can be said to be the monthly gross salary. No act prohibits an employer from adding or showing any kind of employer's side contribution for its employees in the CTC.

Before the implementation of ESIC deduction, suppose your CTC was ₹13,000 per month, and it included employers' contributions towards PF, PT, etc. In the same period, your net salary would be, let's say, ₹10,500 per month. However, after the deduction of ESIC ER & EE contributions, your net salary comes to, let's say, ₹9,900 per month. The EE Deduction is, let's say, only ₹270 per month, so your net salary should be ₹10,500 - ₹270, i.e., ₹10,230, but it is coming out to be ₹9,900. This may indicate that the employer is deducting their contribution from your salary, which could lead to penal provisions, as mentioned by Shri Sai Kumarji.

So, this is totally wrong, unfair, and possibly illegal!

Mangesh Wakodkar Aurangabad

"I am working with one company, and the issue is that when we were all given Appointment Letters, we were provided with the package in CTC. Now, the company authorities deduct the employers' share of ESIC from our salary. Can they do this? When we all asked for the reason, they explained the same reasoning. Can you all help me out?

Regards, Ramesh"

I agree with you, Prasoon, that the employer may be including the employer's deduction in CTC, but it does not entitle him to deduct his contribution of ESI from the wages receivable by the employee. That's what I said.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

I came to know that most of the MNCs are making the same mistake. I don't understand how they can deduct the employer's share. You can demand a breakup of your salary and file a complaint with the ESI Department, PF Officer, or Inspector of Labour.

With regards,

V. Subbarao

Addressing Salary Slip Errors

If you receive a salary slip with errors, first reference the Act that addresses the issue and clarify with the HR department. If they still do not rectify the situation, request the payslip showing ESI deductions. With this evidence, you can approach an ESIC officer in your region.

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