How Do I Set Up a CTC Structure with ESI and PF Deductions for My Pharma HR Team?

CTC Calculation in Pharmaceutical HR

Hi everyone, I am Ajay Bharat, working in a pharmaceutical company as an HR. I have a few doubts regarding CTC calculation. We used to pay salaries by hand and did not have ESI and PF. Recently, I have registered for ESI and PF. The problem is that our employees are getting net pay without any deductions. Now, I want to set up a CTC structure.

For example, we are currently paying a net salary of 7000/- per month. We now want to add employer and employee ESI and PF deductions on 7000/- and create a CTC for an employee. Can you please suggest how to calculate this backward?

Salary Breakup

Earnings
- Basic 50%
- HRA (on basic 40%)
- DA (10%)
- CA (800 or 1600) is fixed based on salary
- Other allowance

Deductions
- Employee ESI
- PF 12% on basic
- Employee ESI 1.75% on gross

Guys, please help me out as this is very urgent for me.

Regards, Ajay Bharat
[Phone Number Removed For Privacy-Reasons]

Employer Deductions

- Employer PF (13.61 * 50% (basic) / 100)
- Employer ESI (4.75 * gross salary / 100)

Hello Ajay,

It's great to see you taking proactive steps to formalize your company's CTC structure. Here's a simple step-by-step guide to help you with the backward calculation of CTC:

1. 🤸 Start with the employee's gross salary, which is currently INR 7000. This amount is the total of Basic, HRA, DA, CA, and other allowances.

2. 🎶 Calculate the Basic pay. As per your structure, it's 50% of the gross salary. So, Basic = 7000 * 50/100 = INR 3500.

3. 🏰 Next, calculate HRA. It's 40% of Basic pay. So, HRA = 3500 * 40/100 = INR 1400.

4. 🔚 Calculate DA, which is 10% of Basic. So, DA = 3500 * 10/100 = INR 350.

5. 🌀 The CA is fixed at INR 800 or INR 1600 based on the salary. In this case, let's take it as INR 800.

6. 🐅 The rest of the gross salary will be the other allowance. So, Other allowance = Gross Salary - (Basic + HRA + DA + CA) = 7000 - (3500 + 1400 + 350 + 800) = INR 950.

7. 🈁 Now, let's calculate the deductions. The employee's PF is 12% of Basic. So, PF = 3500 * 12/100 = INR 420.

8. 🈹 The ESI is 1.75% of gross. So, ESI = 7000 * 1.75/100 = INR 122.50.

9. 🉺 The employer's contribution is also a part of the CTC. Calculate employer PF, which is 13.61% of Basic. So, Employer PF = 3500 * 13.61/100 = INR 476.35.

10. 🍉 Calculate employer ESI, which is 4.75% of gross. So, Employer ESI = 7000 * 4.75/100 = INR 332.50.

11. 🈰 Finally, calculate the CTC. CTC = Gross Salary + Employer PF + Employer ESI. So, CTC = 7000 + 476.35 + 332.50 = INR 7808.85.

Please note, these calculations are based on the percentages you provided and might vary if there are changes in the PF and ESI rates as per the labor laws of India. I hope this helps! Let me know if you have any other questions.