Is It Fair for Employers to Adjust Salary Structure for ESI Without Raising CTC?

Hi Prabhu,

Due to the new rule of the ESI being increased to 21,000, my employer revised my salary structure without increasing my CTC to cover the employer ESI contribution part. As a result, my salary has been reduced by both the employee's and employer's contributions from my side.

Could you please confirm if the government has strictly instructed employers to increase the CTC for their contribution part, or if employers can adjust the salary structure without increasing the CTC for their benefit?

Regards,
Prabhu H

If your current salary is reduced due to the implementation of ESI, then I do not think there is anything wrong with it. But for better clarity, you may share your last salary with the current salary structure.

My current fixed salary is 250,000 per annum. My question is, why did my employer, instead of raising the ESI (Employer contribution) in my CTC, adjust the same in my old CTC itself?

Now, my take-home salary has been reduced by nearly 1,100 rupees. Both employee and employer contributions were deducted from my side.

If you were already registered under the ESI Act and participated in it, then you cannot do anything about a change in your salary structure. However, if your employer opted to modify your salary structure to evade provisions of the Act, then it is illegal because their action is detrimental to you as well as national interest.

Attached is my salary structure below.
Does the employer have the right to adjust the salary structure without increasing CTC for ESI employer contribution?

The employer can change the salary structure institutionally without an intent to escape his statutory liability. If the employer picks and chooses a few, that might be wrong! If the intent is ill, then a legal remedy can always be looked into.

But, be careful that in a latter case, your employment will always be at the mercy of your employer, regardless of how well you perform.

In your case, the gross salary limit is covered under the ESI Act. The change in your take-home salary is triggered by a provision of the Act, so the employer is not obligated to compensate you for the virtual loss. It would be better to speak with your employer and request him with some legitimate grounds.

Employer's Obligation for ESI Contributions

The employer cannot deduct his contribution from the salary of the employee. The employer is under an obligation to make ESI contributions of his share from his own funds.

In your case, the employer's actions are illegal and unjustified as they have resulted in a reduction of your salary. Your salary can only be reduced by the amount of your own ESI contribution.

CTC Concept and Legal Recourse

The CTC concept is a commercial concept and is not recognized under various labor laws. You have the option to challenge this action before the appropriate authority if you wish.

Regards,
[username]

Dear all,

While going through the attachments, it is observed that the employer has changed/revised the salary structure from Rs. 19,149 to Rs. 18,171. No doubt, the basic has increased from Rs. 12,766 to Rs. 13,281, but the gross earnings are reduced by Rs. 978, which is illegal and unjustified.

P. K. Sharma

Thanks for sharing your views. Is there any law stating that an employer should not change the salary structure to avoid ESI contributions by transferring the burden to employees?