ESIC Employer Contribution From My CTC - As Per Policy?

Dear Team,

As per the recent ESIC Act, I am eligible for ESIC coverage as my payment is below 21000, which has been applicable since January 2017. However, I am facing an issue where my employer is deducting their 4.75% contribution from my salary, impacting my take-home pay. I would like to know if this deduction aligns with the policy or if the employer should adjust the CTC. Additionally, ESIC contribution was not reflected in the CTC during the salary revision in May 2016.

Please assist.

Thanks in advance.

They cannot do that. Contact your area ESIC enforcement officer. You can also lodge a preliminary complaint here :: Grievance Redress Mechanism in Government ::.

Then write a complaint letter to ESIC department. Then contact the area labor inspector under the Payment of Wages Act.

Basis of opinion: Under the act:

"Notwithstanding anything contained in any other enactment but subject to the provisions of this Act and the regulations, if any, made thereunder, the principal employer shall, in the case of an employee directly employed by him (not being an exempted employee), be entitled to recover from the employee the employee's contribution by deduction from his wages and not otherwise:

PROVIDED that no such deduction shall be made from any wages other than such as relate to the period or part of the period in respect of which the contribution is payable, or in excess of the sum representing the employee's contribution for the period.

Notwithstanding any contract to the contrary, neither the principal employer nor the immediate employer shall be entitled to deduct the employer's contribution from any wages payable to an employee or otherwise to recover it from him.

Any sum deducted by the principal employer from wages under this Act shall be deemed to have been entrusted to him by the employee for the purpose of paying the contribution in respect of which it was deducted.

The principal employer shall bear the expenses of remitting the contributions to the Corporation."

Read this Employees State Insurance or ESI Act, Rules, Forms, Returns: Simplified: ESI Contribution Rates, Rules, Procedure, Penalty, and Related Matters.

This is a blatant violation of the provisions of the ESI Act. But before invoking authorities under the law, take it up with the proper authority in the company. Bring to their attention the illegal act and ask them to refund the amount wrongly deducted. If they still persist, contact the Inspector as advised above by another colleague.

Regards,

V.L. Nagarkar
HR Consultant

Employee share of ESI contribution is @1.75% on gross salary earned only and has to be deducted. The employer should contribute their share @4.75% on gross salary earned. The coverage limit is Rs21,000/- per month.

1. Sir, as far as I understand, the term "CTC" is not considered "wages" as defined under the ESI Act, 1948. If an employer deducts the employer's share of contributions from the "wages" of an employee, only then can action be taken against said employer.

2. For more clarity, I hope you will review the definition of "wages" as outlined in the Act.

You are probably looking the wrong way at this. What is the amount of deduction shown in your payslip? CTC is a meaningless concept. What the employer puts in CTC does not matter in law. CTC is only a ploy to fool you into thinking you are getting more. Is there any reduction in your gross salary as shown in your payslip before and after the start of ESIC deductions?

Actually, we are working on third-party payroll, and as per your suggestion, I informed HR. They mentioned that we are working with the client, and it depends on client approval. Once the client approves, we will provide it to you; otherwise, we cannot refund the deducted amount.

I am now confused as to why they are shifting the responsibility to the client. We are employees of this organization, and they should contribute without deducting from our salary.

Additionally, in November 2016, an email was sent regarding a change in the minimum wages act, with the basic wage increased from 8700 to 9000.

Moreover, the bonus has been increased from 292 to 750 as of November 2016, after numerous reminders. However, no dues have been provided, and they mentioned that a case has been filed in the high court regarding the bonus dues, which will be provided once the results are out.

We fall under the Shop and Commercial Establishment Act, and the basic wage has been increased to 9000 from December 2017.

Please advise, as the employer keeps misguiding us, taking advantage of our lack of knowledge and implementing rules arbitrarily.

We are covered under the Shop and Commercial Establishment Act, and we have been receiving a basic salary of 9000 since December 2016. It was incorrectly mentioned as December 2017 in the previous comment.

You are probably looking the wrong way at this. What is the amount of deduction shown in your payslip? There is no amount showing about employer contribution in the payslip as well as in my salary revision letter. My CCA allowance is deducted from my salary. There is a drastic change in my allowances (CCA).

CTC is a meaningless concept. What the employer puts in CTC does not matter in law. CTC is only a top to fool you into thinking you are getting more.

Is there any reduction in your gross salary as shown in your payslip before and after the start of ESIC deductions? Before the act, I am getting a salary as per the salary revision letter and I don't have issues. But after the act applied in Jan 2017, they reduced Rs 835 from my salary, and gross is showing Rs 835 less than the Dec 2016 salary.

Please furnish details of Gross Salary earned, deductions, and Net Salary paid for December 2016 and January 2017.

Who is paying your salary - the principal employer or contractor, and who has recruited you?

Minimum wages have not changed but increased from Rs 8,700 to Rs 9,000. I hope you have no issue with this.

The bonus amendment with retrospective effect for 2014-15 is before the court.

You have been paid an annual bonus monthly on a Basic Salary of Rs 9,000 at 8.33%, which comes to Rs 750.

Please revert with correct information.

Please clarify again - was there an actual reduction in your gross or was it a reduction compared to your increment letter? What was the gross before and after December 2016?

You are probably looking the wrong way at this.

What is the amount of deduction shown in your pay slip? --- Answer --- There is no amount showing about employer contribution in the pay slip as well as in my salary revision letter. My CCA allowance is deducted from my salary. There is a drastic change in my allowances (CCA).

CTC is a meaningless concept. What the employer puts in CTC does not matter in law. CTC is only a top to fool you into thinking you are getting more.

Is there any reduction in your gross salary as shown in your pay slip before and after the start of ESIC deductions? Answer -- Before the act, I am getting a salary as per the salary revision letter and I don't have issues. But after the act was applied in Jan 2017, they reduced Rs. 835 from my salary, and the gross is showing Rs. 835 less than the December 2016 salary.

Please find attached snaps for your information. I have attached the salary revision letter along with the December, January, and February salary slips for further clarification. Thank you for your response.

Dear all,

Please help, I have attached all documents required for your study. Please revert on that as almost 2500 Rs have been deducted from my gross salary in the last 3 months.

Reduction in salary to compensate for em-lower safe of PF or ESIC is illegal. Therefore, their reduction of gross wages by adjusting the CCA component is illegal.

You can fight this matter if you wish by filing a complaint with the ESIC or the labor commissioner. But remember that when you do that, you will surely lose your job. So any action you take should be clearly thought out.

Thank you for your valuable response.

As per the discussion with HR, they are saying we have the right to change internal components, and as your CTC has not changed, you cannot challenge us. We have kept your CTC as it is. I just want to know if ESIC is applicable to us, they should add their contribution to CTC and revise it. Please correct me if I am wrong. We are simply suggesting to them to deduct only the employee contribution and add their contribution to the CTC to increase the CTC amount, as it has not been included in my salary revision.

Please refer your HR department to the following provision in sec 72 of the esic act.
Please note that wages refers to gross wages and not to CTC. The concept of CTC is not recognised by law. Therefore, any attempt of the employer to reduce your actual wages to pay for the ESIC contribution is illegal.
72. Employer not to reduce wages, etc. — No employer by reason only of his liability for any contributions payable under this Act shall, directly, or indirectly, reduce the wages of any employee, or except as provided by the regulations, discontinue or reduce benefits payable to him under the conditions of his service which are similar to the benefits conferred by this Act.