Is It Fair to Adjust an Employee's CTC Due to ESIC Deductions After a Salary Hike?

Dear All,

One employee of my organization was under ESIC before his appraisal. His appraisal falls in the month of July. After the appraisal, his salary increased, and he was no longer covered by ESIC. However, deductions were made till September as per ESIC regulations. This led to an increase in his CTC. Now, with the October salary, the payroll department deducted his CTC and mentioned that the ESIC part had not been included, resulting in a lower CTC.

Fairness of CTC Deduction

Kindly suggest if it is fair to deduct the CTC of an employee in such circumstances. The employee's previous salary was 1.84 LPA, the appraised salary in September was 2.45 LPA, and the revised salary is 2.36 LPA.

Thank you.

Naturally, when the employer is not contributing towards ESI, the cost to the company would come down. At the same time, your take-home salary will increase. This reduction in CTC is due to the exclusion of one component by the operation of the law. There is nothing wrong with it. Now, when you become out of ESI, the employer will put you under some medical insurance, say, a mediclaim policy for yourself and your family, and also an Employees' Compensation Policy. The premiums paid for these policies may be taken as the cost to the company and added to the CTC; then naturally, your CTC would again go up. Is this okay?

The Lesson

It should be the gross salary that should be looked upon and not the CTC whenever you accept an employment offer. CTC will include so many components which are not directly payable to you but are either costs to be incurred by the employer or incomes that you will earn only on achieving certain targets.

Regards,
Madhu.T.K

ESI Coverage and Contribution Details

ESI will cover CTC up to Rs 15,000. ESI contribution deduction will continue until the end of the half-year, even if a salary increment is made during this period.

For example, if a monthly salary is Rs 15,000 per month and a salary increment occurs in the month of June, then ESI will continue until September (completion of the first half-year).