Confused About ESIC Deductions from CTC? Let's Discuss What's Fair and Expected

As I wanted to know exactly the new ESIC rule and if both percentages are included in the CTC. The HR of the company didn't mention or say anything related to this, but they are deducting both sides ESIC from CTC - 1.75 and 4.75 from the employee's CTC.

Clarification on CTC and ESI Act

The term "CTC" is not used in the ESI Act, 1948, or the rules and regulations framed under it. I believe it is also not used in any labor laws. CTC reflects the cost to the company and is not considered "wages."

You can check your pay slip to determine what your "wages" are as fixed by your employer. To understand which components are considered wages, refer to definitions in various labor laws, including the Payment of Wages Act, Minimum Wages Act, and ESI Act, 1948. If the employer is adding the 4.75% employer's share of contribution to your so-called "CTC," then there is nothing wrong. However, the employer cannot deduct their share of contribution from the "wages" as defined in various enactments.

Dear Sir,

Our HR head didn't mention any deductions during the interview. She used the term CTC, and it was the only thing mentioned without any reference to deductions. However, now they are deducting both sides of PF and ESIC from the salary.

As far as we know, the ESIC rule does not apply in this case, but they have been deducting it for the past month.

Thank you.

1. Sir, I could not understand what you mean by the words "As we know that ESIC rule is not applicable but they are deducting it from the previous month." Are you not covered or coverable under the ESI Act?

2. I think that at the time of the interview, all employers indicate CTC (or what is called "package") to the new recruits.

Understanding CTC and Deductions

CTC is a term that denotes the cost the company incurs due to your employment. It includes the salary, the employer's contribution towards EPF & ESI, bonus, gratuity, etc. Hence, there is nothing wrong with deducting the company's EPF/ESI contributions from your CTC. Please note that they should not deduct it from your gross salary. The gross salary is a combination of basic salary and allowances. They will deduct your contribution to EPF (12% of basic salary + dearness allowance - statutory) and ESI (1.75% of gross salary). You will be covered under ESI if your gross salary is equal to or less than Rs. 15,000/-. Unless your company is covered under the EPF Act as well as the ESIC Act, they will not deduct the contributions from your salary. You may check with your senior colleagues about the coverage of EPF and ESIC.

Regards

Understanding CTC and Deductions

CTC means Cost to Company. It is a term indicating the total cost incurred by the company for hiring a particular employee.

However, in your writing, you mentioned: "but now they are deducting both side PF and also both side ESIC from that salary." Are they deducting 24% (12% employee + 12% employer share) PF-FPF and (1.75% employee + 4.75% employer share) ESIC from your salary? I think it should not be the case. They should be deducting 12% employee's share (PF) and 1.75% employee's share (ESI) from your salary, which is quite legal.

Regards,
Arun Dixit
[Phone Number Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]

Dear Arun Sir,

Yes, you are right. They are deducting 24% from the salary and also 6.5% for ESIC. However, they are showing only one deduction in the payslip.

Regards,
Sumit

Are they not depositing your salary in the bank? As you say, in the salary slip, they are only deducting the employee's contribution. Then how do they manage the difference between the actual paid and net payable salary? I mean, do all employees, after receipt of their respective salaries, reimburse the employer for their ESI and PF share again? How many employees are working in the subject establishment? Is the subject establishment registered with the Factories Act or Shops and Establishments Act?

Anyway, if the management is deducting both the employee's and employer's share in respect of PF and ESI from an employee, then this is not at all in accordance with the legal provisions. An aggrieved employee can lodge a complaint with the competent authority under the Payment of Wages Act as well as with the respective PF Commission or ESIC Directorate. However, I still wonder, what proof does the employee have that both the employee's and employer's share is being recovered from them? Please let me know the detailed procedure of disbursing salary/wages.

I hope this helps! Let me know if you need any further assistance.

Dear sir,

Please check the attachment. This is the salary slip of my junior. His CTC is 18500. Please check the slip and give your guidance, as he is not at all satisfied with all the deductions and not able to understand the structure of his salary. During the interview, they didn't inform him about the ESIC deduction or PF. But now, each and everything is being deducted from his CTC.

Waiting for your response.

Regards,
Sumit

I have seen the attachment. The salary slip seems to be perfect. They have also provided the bank account number of the respective employee. This indicates that the employees are receiving their payment through the bank.

Please note that deductions such as ESIC/PF-FPF/State Prof. Tax/Labour W. Fund, etc., are statutory deductions. These deductions must be taken from the salaries/wages when the organization falls under the provisions of the respective enactment. Every employer has the statutory responsibility to deduct and deposit these contributions with the respective government agencies. Therefore, there is little room for whether the employee is satisfied or not. It appears that your junior is confused about the term CTC.

Please clarify this with him as discussed above and in previous conversations within this thread.

Sir, ESI contribution has been deducted on the total amount of Rs. 16,135/-. May I know what the wages of the said employee were in the base month, i.e., in October 2016.

Dear Arun Sir,

The point is that during the interview, the HR didn't mention any deductions. She said that your CTC is 18500. At that time, there were no ESIC rules, and the main problem is that the employer deducts both PF and ESIC from the CTC without informing the employee. The employee is unaware of this, and the HR did not provide any information about it. This is the main issue.