ESI Deduction - Need Help

Hi,
I am new to HR and working with an IT organization.Here employees are hired from outsource vendors. For any grievance of OS employees we have to deal with their respective vendor. I need some clarification on one issue before i speak with them. One of the Employee comes under ESI scheme.His gross salary is 8000/- and ESIC is deducted Rs.520/- pm (6.5% on gross) , same is included in his CTC as part of salary.
However, as per the ESIC scheme Employer contribution is 4.75 % & Employee's 1.75 %.
Can any one clarify why total 6.5% is deducted from salary.
Thanks & Regards
Marufa

Hi Sanjeev,
Thanks for the feedback.
But still my doubt about ESIC is not clear. Can u pls clarify.
Is ESIC is deducted flat @ 6.5 % fm Employee's gross salary ??
If yes, then what it means by Employee and Employer contribution.

Hi Sanjeev

If the CTC is Rs. 8000/-

Gross definately will be lessthan that

on Gross 1.75% will be deducted for the Employee contribution

again on Gross 4.75% will be Deucted for the Employer Contribution the total will be remitted to the ESIC

When you are promised CTC you have make the Break up and to arrive the Gross Salary on the Gross salary only the above said caliculation will be done

Ex. If the Gross Sal. Rs. 6000/- as below

Rs. 3000 Basic

Rs. 1500 HRA

Rs. 1500 Others

Rs.72000/- gross sal. per Anum

PF

Employee

Basic X12%= PF= 3000X12%=360 Per Month

Per anum= 360X12=4320/-

Employer

Basic X12%= PF= 3000X12%=360 Per Month

Per anum= 360X12=4320/-

ESIC

Employee

Gross X1.75%=6000X1.75%=105

Per Anum= 105X12=1260

Employer

Gross X4.75%=6000X4.75%=285

Per Anum= 285X12=3420

This Total of Employee's and Employer's PF and ESIC=

4320+4320+1260+3420=13320

This 13320/- is to be added to the Gross Salary that is called CTC

As per the compny to Cmompany other Components also to be added than caliculated

=7200+13320=85320/- is the CTC per anum

Monthly CTCis = 7110/-

Caliculation can be done in Reverse also

Dear Marufa

Deduction of Employer's Share (4.75%) from the gross wage of employees is a criminal offence under Section 85 of ESI Act and will also be a criminal offence under Payment of Wages Act. So stop this and you can only deduct 1.75% from his wage and the employer has to add 4.75% of the wage from his own source at the end of the month and pay total 6.5@ before 21st of next month.

Since you are engaging contractors (called Immediate Employer) for some services, it is the contractor to pay the wage to his employees, provided to you and it he who has to deduct 1.75% from the wage and pay 6.5 on totall wage to ESI and show proof thereof to you, by giving copy of monthly challan and copy of half yearly return, so that you can show compliance to the ESI. However in case the contractor fail to pay ESI contribution for his worker, law allow you to deduct the total 6.5 % of the Contractors Bill (and not from wage of employee) before payment of money to him. . Though you could deduct 6.5% of total Bill of contractor, the contractor can only deduct 1.75% of wage from worker.Do not get confused with these two situation.

O.Abdul Hameed
Forermly Add Commissioner ESIC
CEO of Santhi Hospital
[Login to view]