Dear Seniors,
Kindly let me know your opinion as to whether the CTC Format I have made is correct.The reason for this is:
1.Can we show the value of Paid leave ,although I have'nt added it to CTC.
2.If an employee has been given vehicle for office and personal use ,can we add 1/3rd of Maintenance/depreciation /fuel to CTC.
Your early response and guidance will really help me...
Looking fwd to hear from you
Thanks and RGS
Anagha
From India, Calcutta
1Kindly let me know your opinion as to whether the CTC Format I have made is correct.The reason for this is:
1.Can we show the value of Paid leave ,although I have'nt added it to CTC.
2.If an employee has been given vehicle for office and personal use ,can we add 1/3rd of Maintenance/depreciation /fuel to CTC.
Your early response and guidance will really help me...
Looking fwd to hear from you
Thanks and RGS
Anagha
From India, Calcutta
Hi Anagha !
My views:
Gratuity is payable after 5 years of continuous service. What will be your stand if someone leaves after say 3 years? Further, if at any point of time you pay gratuity, it will be based on basic salary at that point of time. how will you calculate it? how will you convince the employee? I opine that gratuity should not be included in CTC.
Company should not include Paid Leave in CTC (however, it is not 'cannot')
Vehicle depreciation cost should not be added to CTC. Who is going to pay the salary for driver? who is going to arrange for fuel. It is advised to have the employee arrange the same and company reimburse his expenses for the same. You can refer to FBT provisions or consult your A/c. - Finance dept. for the same.
Also, you can consider Medical Allowance / Reimbursement as part of CTC. It helps employee get IT exemption. Same is the case with food coupens.
Further, CTC has to be understood and agreed upon by both the parties well in advance so as to avoid any negative feeling later on based on actual earnings.
Further, have you fixed ration (proportion) for BAsic and allowances? Why have you kept the Education allowance and special allowance blank? It helps to distribute the allowances in 4 - 5 heads.
Hope above is of some help to you.
Let me have ur feedback.
- Hiten
From India, New Delhi
My views:
Gratuity is payable after 5 years of continuous service. What will be your stand if someone leaves after say 3 years? Further, if at any point of time you pay gratuity, it will be based on basic salary at that point of time. how will you calculate it? how will you convince the employee? I opine that gratuity should not be included in CTC.
Company should not include Paid Leave in CTC (however, it is not 'cannot')
Vehicle depreciation cost should not be added to CTC. Who is going to pay the salary for driver? who is going to arrange for fuel. It is advised to have the employee arrange the same and company reimburse his expenses for the same. You can refer to FBT provisions or consult your A/c. - Finance dept. for the same.
Also, you can consider Medical Allowance / Reimbursement as part of CTC. It helps employee get IT exemption. Same is the case with food coupens.
Further, CTC has to be understood and agreed upon by both the parties well in advance so as to avoid any negative feeling later on based on actual earnings.
Further, have you fixed ration (proportion) for BAsic and allowances? Why have you kept the Education allowance and special allowance blank? It helps to distribute the allowances in 4 - 5 heads.
Hope above is of some help to you.
Let me have ur feedback.
- Hiten
From India, New Delhi
Thanks Hiten for your quick Inputs.
My cLarification:
a.This is a sample and we have bifurcated the salary into allowances.
2.Company normaly provides driver (24hour) and for Fuel we have arrangement with Patrol Pumps.
3.Gratuity is shown but it has been clarified that payable after completion of 5 years.The logic is the employee must feel that this is the amount which accrues and is payble after 5years of service and acts as a motivation.
4.Since the vehicle is given to employee and is at his service for 24hours than why a part of Maitenenece and depreciation should'nt be added to his CTC.
5.For Medical we have Mediclaim and Accident policy in place.
6.Paid leave is just shown and never included in CTC.
Now after these clarification could you pl. let me know whether this is correct method of calculating CTC.
Rgs
Anagha
From India, Calcutta
My cLarification:
a.This is a sample and we have bifurcated the salary into allowances.
2.Company normaly provides driver (24hour) and for Fuel we have arrangement with Patrol Pumps.
3.Gratuity is shown but it has been clarified that payable after completion of 5 years.The logic is the employee must feel that this is the amount which accrues and is payble after 5years of service and acts as a motivation.
4.Since the vehicle is given to employee and is at his service for 24hours than why a part of Maitenenece and depreciation should'nt be added to his CTC.
5.For Medical we have Mediclaim and Accident policy in place.
6.Paid leave is just shown and never included in CTC.
Now after these clarification could you pl. let me know whether this is correct method of calculating CTC.
Rgs
Anagha
From India, Calcutta
Hi Anagha !
Noted your points.
1 Clarified. You do have a break up system.
2 For fuel arranged through petrol pumps you should have clarity on monthly consumption / limit with the employee concerned. Also you will have to have clarity about consumption on fuel for commuting for duty, occassional official tours and persoal tours. Driver's salary is cleared.
3 Your intention of using gratuity payment as a motivational factor is appreciated but practically you will have to process a number of F & F settlements before 5 years. Will you take into account gratuity payment?
Take this example - A manager joins in 2007 with basis salary of 40000. in 2014 he leaves at basic salary of rs. 65000. Now gratuity for 2007 is 1650 (approx) but if you pay him gratuity in 2014, you will pay him gratuity @ 65000 for all 7 years. Calculate what you would have budgeted for him and what the actual payment will be.
Further, if someone leaves in say 2010, cant he as for payment of the sum calculated towards gratuity for 3 years? People do this. They ask for it and logically they are justified. Per annum Cost to company is supposed to be paid within a year and one cannot project part of CTC at the end of 5 years.
4. The ownership of the vehicle will remain with company so depreciation should be liability of company (owner) and not the user.
5. Regarding medical allowance, an employee can claim exemption from IT if he is paid medical allowance as part of salary (max. upto 15000 per annum). Inclusion of medical allowance will hepl them have tax benefit. Mediclaim policy is different then this which you can count as part of CTC.
6 Paid leave - you have clarified.
Further, as a thumb rule we follow the ratio of 50 - 50 for Basis - allowances as components of CTC. So if CTC is Rs. 100000 than basic would be 4200 per month. This you can consider as an option. The industrial practices are between 40 to 60 %.
Hope the above is of help to you.
Regards,
Hiten
From India, New Delhi
Noted your points.
1 Clarified. You do have a break up system.
2 For fuel arranged through petrol pumps you should have clarity on monthly consumption / limit with the employee concerned. Also you will have to have clarity about consumption on fuel for commuting for duty, occassional official tours and persoal tours. Driver's salary is cleared.
3 Your intention of using gratuity payment as a motivational factor is appreciated but practically you will have to process a number of F & F settlements before 5 years. Will you take into account gratuity payment?
Take this example - A manager joins in 2007 with basis salary of 40000. in 2014 he leaves at basic salary of rs. 65000. Now gratuity for 2007 is 1650 (approx) but if you pay him gratuity in 2014, you will pay him gratuity @ 65000 for all 7 years. Calculate what you would have budgeted for him and what the actual payment will be.
Further, if someone leaves in say 2010, cant he as for payment of the sum calculated towards gratuity for 3 years? People do this. They ask for it and logically they are justified. Per annum Cost to company is supposed to be paid within a year and one cannot project part of CTC at the end of 5 years.
4. The ownership of the vehicle will remain with company so depreciation should be liability of company (owner) and not the user.
5. Regarding medical allowance, an employee can claim exemption from IT if he is paid medical allowance as part of salary (max. upto 15000 per annum). Inclusion of medical allowance will hepl them have tax benefit. Mediclaim policy is different then this which you can count as part of CTC.
6 Paid leave - you have clarified.
Further, as a thumb rule we follow the ratio of 50 - 50 for Basis - allowances as components of CTC. So if CTC is Rs. 100000 than basic would be 4200 per month. This you can consider as an option. The industrial practices are between 40 to 60 %.
Hope the above is of help to you.
Regards,
Hiten
From India, New Delhi
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