Understanding ESI Contributions: Should It Be Based on CTC or Net Salary?

Hi, everyone.

Let me know that an employee's CTC is Rs. 10,000/- and net salary is Rs. 8,728/-, on which we calculate ESI contribution of the employee. Is it based on the CTC or the net salary?

Understanding ESIC Contribution Calculation

ESIC contribution of an employee does not depend on CTC or net salary but on the earned gross salary for that month. For example, if a particular employee's CTC is Rs. 10,000 per month and the gross salary is Rs. 9,000 per month (gross salary is the amount the employee earned before any deductions on the organization's part), and if after deductions the employee receives a net salary of Rs. 8,500 per month, then the ESIC contribution of that employee will be calculated on the gross salary, i.e., Rs. 9,000.

Hope this explanation helps you!

Regards,
Abhishek

Understanding CTC and Salary Components

"CTC," i.e., Cost to the Company, is the total annual cost incurred by the management/employer towards recruitment, training, retention, and social security of the employee hired by it. Gross salary is the total monthly salary payable to the employee before authorized deductions, and net salary is the actual take-home salary paid after all deductions. Statutory contributions payable, like EPF and ESI subscriptions, have to be calculated based on the statutorily prescribed salary/wage components of the monthly gross salary.

Regards

Dear Friend,

ESI should be calculated on the gross salary (i.e., monthly earnings before deductions) and not on CTC or Net Takehome.

Hope this is clear.

Chill HR

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