Is ESI Applicable to Our Small Company? Seeking Clarity on Deductions for Low CTC Employees

Dear seniors, I am working in a small organization with 25 employees on our payroll, and I have a query regarding the applicability of ESI within our organization. Approximately 12 individuals have a CTC equal to or less than INR 15,000 per month. I would like to know if ESI is applicable to our organization. Additionally, if an individual has a CTC of 10k, what percentage of deduction will be made from their salary? Will it be 1.75% (only their contribution towards ESI) or 6.5% (i.e., the total contribution towards ESI)? Your valuable suggestions are greatly appreciated. I am eagerly waiting for your prompt response.

Thanks & Regards,
Babita

For your organization, ESI is applicable. You should enroll with ESI. The contribution to ESI is based on gross pay, not on CTC. Employees who have a gross pay of less than or equal to ₹15,000 are eligible for ESI deductions. The employee has to contribute 1.75% of the gross, and the employer has to contribute 4.75% of the gross.

Thank you.

I wanted to clarify one more thing. Our employer has decided that the cost to company (CTC) of an employee is 15K. The employee receives 13K monthly, with the remaining amount of 2K accumulated monthly and paid annually. If the employer implements the ESI scheme now, how should the contribution be bifurcated? Is the employer liable to take the whole contribution from the employee's CTC, i.e., from the 15K itself, or should the employer make their own contribution separate from the 15K?

I am waiting for your quick response.

Thanks & Regards,
Babita.

In that case, I hope your payslip should show a Gross pay of ₹13,000/- (after deduction of PF & ESI). ₹2,000 x 12 = ₹24,000, which you can provide as an incentive to the employee at the end of the year. Additionally, ESI is applicable for that particular employee as well.