Your question is nnot very clear ...in what perpespective are you asking this question.Please reframe your question for better replies.. Rgds Anu
From India, Calcutta
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5From India, Calcutta
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Hi All,
I'm new to the forum. I'm working as an HR Executive in an IT firm. The appraisal activity in my organization has started, which makes me clear on the semi-appraisal method. My thinking is, if appraisals are taking place once every 6 months, i.e., semi-annually, then why should the CTC be termed as CTC PA in the revised CTC? It is certain that a particular amount of CTC will be for the next 6 months, and thereafter in the next appraisal, another figure of CTC will come into the picture. Though I'm aware that appraisals do not necessarily result in a salary hike only, as there could be no changes depending on a case-to-case basis.
Can anyone tell me the logic behind it?
From India, Bangalore
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I'm new to the forum. I'm working as an HR Executive in an IT firm. The appraisal activity in my organization has started, which makes me clear on the semi-appraisal method. My thinking is, if appraisals are taking place once every 6 months, i.e., semi-annually, then why should the CTC be termed as CTC PA in the revised CTC? It is certain that a particular amount of CTC will be for the next 6 months, and thereafter in the next appraisal, another figure of CTC will come into the picture. Though I'm aware that appraisals do not necessarily result in a salary hike only, as there could be no changes depending on a case-to-case basis.
Can anyone tell me the logic behind it?
From India, Bangalore
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Cost to the company is not related to annually or bi-annually. It is basically what is the cost to the company of a particular employee. As you said, there may be other perks or incentives that are directly or indirectly related to salary. Therefore, the cost to the company gives a bird's eye view of how much a company is investing in one employee. CTC also helps in budgeting. It depends on the company how to present an employee's salary - gross salary only or CTC based. The CTC annual amount can be divided by 12, and the cost to the company for one month can be derived.
I hope I have cleared your doubt.
Anu :)
From India, Calcutta
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I hope I have cleared your doubt.
Anu :)
From India, Calcutta
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It is beneficial to the company as it can show the employee how much the company is spending on him.
On the other hand, the actual cash one receives from the employer is important, and sometimes it may be 50% or even less than the CTC.
Hope you have a clear understanding now.
From India, Mumbai
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On the other hand, the actual cash one receives from the employer is important, and sometimes it may be 50% or even less than the CTC.
Hope you have a clear understanding now.
From India, Mumbai
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Hi All,
Thank you Anu and Siva for the reply. Based on both of your responses, I understand that the employer will benefit from the term CTC per annum for budgeting purposes. However, my question pertains to the IT industry, where periodic appraisals occur, either quarterly or semi-annually. In my organization, appraisals are conducted semi-annually, and when stating the CTC, it is presented as CTC PA, inclusive of deductions and others.
What I am curious about is why I cannot specify it as CTC for 6 months, considering the next appraisal takes place after 6 months. I acknowledge that appraisals do not solely focus on salary increments but are contingent on performance. There are instances where no pay raise is given in cases of poor performance. In such scenarios, mentioning the CTC per annum would be more suitable.
From India, Bangalore
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Thank you Anu and Siva for the reply. Based on both of your responses, I understand that the employer will benefit from the term CTC per annum for budgeting purposes. However, my question pertains to the IT industry, where periodic appraisals occur, either quarterly or semi-annually. In my organization, appraisals are conducted semi-annually, and when stating the CTC, it is presented as CTC PA, inclusive of deductions and others.
What I am curious about is why I cannot specify it as CTC for 6 months, considering the next appraisal takes place after 6 months. I acknowledge that appraisals do not solely focus on salary increments but are contingent on performance. There are instances where no pay raise is given in cases of poor performance. In such scenarios, mentioning the CTC per annum would be more suitable.
From India, Bangalore
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The benefits of switching to cost to company remuneration structure
Johannesburg, 25 November 2004: The migration from standard remuneration structures to cost to company packages does not only afford the employee tax efficiencies, but has the added benefit of awarding the employee the flexibility to tailor non-cash benefits according to individual requirements.
Ernst & Young partner for Outsourcing Solutions Jaco van der Walt points out that a growing number of companies are switching from standard remuneration packages to cost to company structures in a bid to attract and retain staff of the highest calibre.
The cost to company remuneration structure is a remuneration method that is inclusive of all the benefits enjoyed by the employee in the course of his employment.
In other words, the cost to company structure details the costs that are incurred by the employer in filling a particular position.
Van der Walt, however, notes that employees are generally oblivious of the value of the benefits that come with their employment.
“Cost to company structuring creates a greater employee awareness of the value of their benefits, taking the pressure off salary increases and in turn making it easier to retain staff,” van der Walt explains.
When an employer offers these benefits to the employee, the costs for the organisation tend to be less expensive because of bulk discounts and reduced administration costs.
He adds: “It has been proven through many surveys that employees are often not aware of the cost of their benefits and that should they, on an individual basis, purchase these benefits the costs would be much higher.”
Referring to tax benefits an employee might accrue, van der Walt says recent policy changes have pointed to stricter handling of fringe benefits and the total cost to company is seen as one way of regulating procedures from a tax compliance point of view.
He cautions though, that the employer should follow the conversion process to the letter for the employee to maximise tax efficiencies.
Because the move from standard to cost to company structure constitutes a material change to terms and conditions of service, van der Walt says the onus is vested on the employer to inform and engage the employee on true intention of altering these conditions.
In addition to communicating the necessary changes to the affected employee, van der Walt say all necessary documentation has to be aligned with the new package design to avert a SARS attack.
“An employer cannot, therefore, unilaterally change the terms and conditions of employment without prior consultation with the affected employee.
“A critical factor in a successful salary structure is that such new structure is entered into by mutual consent between employer and employee,” he says.
To maximise tax efficiencies, van der Walt says employers would normally divest the employee of his/her liability to pay any part of the member’s contribution to the provident fund or medical scheme and to shift the liability for the total amount of the employee’s provident or medical aid contribution to the employer.
“Where a true salary sacrifice has taken place, an employees’ salary is reduced by the amount of the salary sacrifice and all benefits calculated based on the salary are similarly reduced,” he says.
As tempting though as a move to cost to company remuneration package can be, van der Walt says the system is equally fraught with pitfalls.
A reduced salary bought about by the shift, implies that contributions to the retirement are reduced.
In addition to bouncing off risk to an employee, the cost to company structure further reduces the statutory contributions to the UIF because of a reduced salary.
He cautions though that the total cost to company remuneration is not a remedy on its own, but is just one factor that should be addressed to ensure an employer would withstand a tax compliance audit from tax authorities.
Regards,
Santosh Verma.
From India, Bangalore
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Johannesburg, 25 November 2004: The migration from standard remuneration structures to cost to company packages does not only afford the employee tax efficiencies, but has the added benefit of awarding the employee the flexibility to tailor non-cash benefits according to individual requirements.
Ernst & Young partner for Outsourcing Solutions Jaco van der Walt points out that a growing number of companies are switching from standard remuneration packages to cost to company structures in a bid to attract and retain staff of the highest calibre.
The cost to company remuneration structure is a remuneration method that is inclusive of all the benefits enjoyed by the employee in the course of his employment.
In other words, the cost to company structure details the costs that are incurred by the employer in filling a particular position.
Van der Walt, however, notes that employees are generally oblivious of the value of the benefits that come with their employment.
“Cost to company structuring creates a greater employee awareness of the value of their benefits, taking the pressure off salary increases and in turn making it easier to retain staff,” van der Walt explains.
When an employer offers these benefits to the employee, the costs for the organisation tend to be less expensive because of bulk discounts and reduced administration costs.
He adds: “It has been proven through many surveys that employees are often not aware of the cost of their benefits and that should they, on an individual basis, purchase these benefits the costs would be much higher.”
Referring to tax benefits an employee might accrue, van der Walt says recent policy changes have pointed to stricter handling of fringe benefits and the total cost to company is seen as one way of regulating procedures from a tax compliance point of view.
He cautions though, that the employer should follow the conversion process to the letter for the employee to maximise tax efficiencies.
Because the move from standard to cost to company structure constitutes a material change to terms and conditions of service, van der Walt says the onus is vested on the employer to inform and engage the employee on true intention of altering these conditions.
In addition to communicating the necessary changes to the affected employee, van der Walt say all necessary documentation has to be aligned with the new package design to avert a SARS attack.
“An employer cannot, therefore, unilaterally change the terms and conditions of employment without prior consultation with the affected employee.
“A critical factor in a successful salary structure is that such new structure is entered into by mutual consent between employer and employee,” he says.
To maximise tax efficiencies, van der Walt says employers would normally divest the employee of his/her liability to pay any part of the member’s contribution to the provident fund or medical scheme and to shift the liability for the total amount of the employee’s provident or medical aid contribution to the employer.
“Where a true salary sacrifice has taken place, an employees’ salary is reduced by the amount of the salary sacrifice and all benefits calculated based on the salary are similarly reduced,” he says.
As tempting though as a move to cost to company remuneration package can be, van der Walt says the system is equally fraught with pitfalls.
A reduced salary bought about by the shift, implies that contributions to the retirement are reduced.
In addition to bouncing off risk to an employee, the cost to company structure further reduces the statutory contributions to the UIF because of a reduced salary.
He cautions though that the total cost to company remuneration is not a remedy on its own, but is just one factor that should be addressed to ensure an employer would withstand a tax compliance audit from tax authorities.
Regards,
Santosh Verma.
From India, Bangalore
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Employee Benefits.doc
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