From a logical standpoint, if the employer complies with all the employee-related acts and wants to make a point to the employee about every rupee spent, then the term "Cost to Company" seems appropriate. For example, in the past, factories that employed more than 500 employees used to provide their employees with subsidized tokens for the canteen. These days, in the IT/ITeS sector where people work abnormal shifts, there are facilities like cabs, lunch/dinner, etc. Similarly, I believe that factories more than 50 kms away from the city provide transportation to the employees at subsidized rates where the employer covers a major part of the cost. Is this understanding correct?
From India, Chennai
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37From India, Chennai
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In the past, these allowances or payments by the employer were outside the package and were accounted for as employee welfare costs. Now, these payments are included in the cost of labor. From the employer's point of view, this is right because these are costs directly attributed to an employee, and as such, he should know what costs to the employer. If there is an understanding as to what is the Cost To Company (CTC), the employee can also decide what will be his take-home salary, what will be his annual component, or what will be his entitlements at the time of his retirement. HR should also be transparent and provide a salary breakup showing the gross salary and the monthly take-home salary apart from the CTC offered. This would reduce the confusion that may arise in the future.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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Hello Thirumurugan,
Like Madhu TK mentioned above, it's more of 'HOW' things... in this case, Salary... are projected.
Why not give the details of the ACTUAL SITUATION you have in mind that made you post this issue? While the general picture is what other members stated, there would always be nuances based on the actual issue/situation.
For example, you mentioned about 'deducting PF and ESI amount of employers part also from employees' salary' — not sure whether you meant the Company REALLY DEDUCTS the Employer's contribution from the employee's salary [which is illegal] OR mentions this figure as a part of the CTC figures [which is factually correct].
There's another aspect to this issue — psychologically, employees have been used to the model/practice of Salary disbursal in the form you mentioned since decades. However, since the mid-1990s, after liberalization in 1991, many of the corporate practices have undergone changes... CTC replacing the earlier model being one of them. This model gives a better idea & control to Employers about the cash outflows [this is a typical American model].
So, I guess, it is also imperative for employees to be in-tune with the trends... in this case, he/she needs to go through the Salary Breakup carefully & clearly to figure out what are the heads of salary & deductions & the take-home.
Frankly, gone are the days when employees can just expect the Take-home figure & let the rest of the expenses the Employer incurs on the employees be the Employer's headache... whatever be the name/term for it. That used to be the employee mental mindset earlier when things were so laid-back, more so in the Public sector [which was the highest employment generating mechanism until 1991 or so]. No more Freebies after that.
If you are referring to an ACTUAL situation, please give the clear details so that the members can give their suggestions/feedback more accurately.
Regards,
TS
From India, Hyderabad
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Like Madhu TK mentioned above, it's more of 'HOW' things... in this case, Salary... are projected.
Why not give the details of the ACTUAL SITUATION you have in mind that made you post this issue? While the general picture is what other members stated, there would always be nuances based on the actual issue/situation.
For example, you mentioned about 'deducting PF and ESI amount of employers part also from employees' salary' — not sure whether you meant the Company REALLY DEDUCTS the Employer's contribution from the employee's salary [which is illegal] OR mentions this figure as a part of the CTC figures [which is factually correct].
There's another aspect to this issue — psychologically, employees have been used to the model/practice of Salary disbursal in the form you mentioned since decades. However, since the mid-1990s, after liberalization in 1991, many of the corporate practices have undergone changes... CTC replacing the earlier model being one of them. This model gives a better idea & control to Employers about the cash outflows [this is a typical American model].
So, I guess, it is also imperative for employees to be in-tune with the trends... in this case, he/she needs to go through the Salary Breakup carefully & clearly to figure out what are the heads of salary & deductions & the take-home.
Frankly, gone are the days when employees can just expect the Take-home figure & let the rest of the expenses the Employer incurs on the employees be the Employer's headache... whatever be the name/term for it. That used to be the employee mental mindset earlier when things were so laid-back, more so in the Public sector [which was the highest employment generating mechanism until 1991 or so]. No more Freebies after that.
If you are referring to an ACTUAL situation, please give the clear details so that the members can give their suggestions/feedback more accurately.
Regards,
TS
From India, Hyderabad
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Dear all,
My name is Tilak, and I'm working as an Executive HR in my company. The CTC system is also operational in my organization. However, I believe it may be illegal because CTC stands for Cost to Company, and all legal dues to employees such as PF, ESI, Bonus, LWW, and gratuity cannot be deducted from the employees' salaries. According to legal provisions, it is the employer's responsibility to contribute to employees' PF and ESI as the employer's share of the contribution.
If this understanding is incorrect, please clarify.
Thank you.
From India, Mohali
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My name is Tilak, and I'm working as an Executive HR in my company. The CTC system is also operational in my organization. However, I believe it may be illegal because CTC stands for Cost to Company, and all legal dues to employees such as PF, ESI, Bonus, LWW, and gratuity cannot be deducted from the employees' salaries. According to legal provisions, it is the employer's responsibility to contribute to employees' PF and ESI as the employer's share of the contribution.
If this understanding is incorrect, please clarify.
Thank you.
From India, Mohali
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Dear Tilak Bhardwaj,
Mere guess about the legality of a term cannot be sufficient to prove it as illegal unless any provision in the law speaks about it being illegal. CTC cannot be said to be illegal unless it is declared so legally by a court's decision or by making a provision in the law by the Government of India/States. However, if you have knowledge about any section declaring CTC as illegal, you may better quote that for the guidance of the members here.
Also, if you are working as an HR Executive, you could better apprise the members of the term of the offer your company adopts to convey to the candidates about the offer of salary while offering appointments to the candidates.
In fact, CTC denotes the total liability of the company that it has to bear with on account of all the dues, including the dues of PF and ESI, etc., of a worker/employee. It does not denote that the employer shuns his responsibility to contribute to those funds, nor does the PF & ESI law prohibit doing so out of the CTC. The term CTC does not in any way mean the take-home salary of the employee.
However, if the employee has an objection to the term CTC, he can feel free to negotiate with the company on the issue at the time of recruitment to convince the recruiters or can decide not to accept the job offer on those terms. But once CTC is accepted by an employee, it becomes part of the employment contract. So far, I have not come across any case where an employee has challenged the CTC in the court of law to get it declared illegal after accepting CTC.
However, if you feel that CTC is illegal, you can take the lead to challenge that in the court of law to get a legal verdict on that.
From India, Delhi
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Mere guess about the legality of a term cannot be sufficient to prove it as illegal unless any provision in the law speaks about it being illegal. CTC cannot be said to be illegal unless it is declared so legally by a court's decision or by making a provision in the law by the Government of India/States. However, if you have knowledge about any section declaring CTC as illegal, you may better quote that for the guidance of the members here.
Also, if you are working as an HR Executive, you could better apprise the members of the term of the offer your company adopts to convey to the candidates about the offer of salary while offering appointments to the candidates.
In fact, CTC denotes the total liability of the company that it has to bear with on account of all the dues, including the dues of PF and ESI, etc., of a worker/employee. It does not denote that the employer shuns his responsibility to contribute to those funds, nor does the PF & ESI law prohibit doing so out of the CTC. The term CTC does not in any way mean the take-home salary of the employee.
However, if the employee has an objection to the term CTC, he can feel free to negotiate with the company on the issue at the time of recruitment to convince the recruiters or can decide not to accept the job offer on those terms. But once CTC is accepted by an employee, it becomes part of the employment contract. So far, I have not come across any case where an employee has challenged the CTC in the court of law to get it declared illegal after accepting CTC.
However, if you feel that CTC is illegal, you can take the lead to challenge that in the court of law to get a legal verdict on that.
From India, Delhi
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Dear Mr. Tilak,
You seem to have a confusion regarding the term CTC. Please understand that CTC is merely a term and nothing else. It shows the exact amount of financial burden the employer carries in respect of any specific position or employee. Nowadays, it has become a trend to clearly indicate this to the employee at the time of an offer. Simply indicating Cost to Company does not imply that the employer expects the prospective employee to pay the employer's share from their salary or wages; this would not be accepted as it is not only illegal but also illogical.
Furthermore, the reality is that the employer is legally obligated to pay their respective share of contributions for the benefit of the employee, whether it is included in the monthly package or reserved for future welfare. Examples of such contributions include the employer's contributions to PF/FPF, provisions for the payment of Gratuity (when eligible), payments to ESIC, and other applicable welfare schemes. In a broader perspective, these contributions by the employer could be viewed as part of the employee's salary or wages, either in the monthly take-home package or at the time of eligibility as per respective enactments.
Considering the CTC in light of the above information, I am confident that your doubts will be clarified.
Regards,
Arun Dixit
9420 69 6660
020 2437 6185
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You seem to have a confusion regarding the term CTC. Please understand that CTC is merely a term and nothing else. It shows the exact amount of financial burden the employer carries in respect of any specific position or employee. Nowadays, it has become a trend to clearly indicate this to the employee at the time of an offer. Simply indicating Cost to Company does not imply that the employer expects the prospective employee to pay the employer's share from their salary or wages; this would not be accepted as it is not only illegal but also illogical.
Furthermore, the reality is that the employer is legally obligated to pay their respective share of contributions for the benefit of the employee, whether it is included in the monthly package or reserved for future welfare. Examples of such contributions include the employer's contributions to PF/FPF, provisions for the payment of Gratuity (when eligible), payments to ESIC, and other applicable welfare schemes. In a broader perspective, these contributions by the employer could be viewed as part of the employee's salary or wages, either in the monthly take-home package or at the time of eligibility as per respective enactments.
Considering the CTC in light of the above information, I am confident that your doubts will be clarified.
Regards,
Arun Dixit
9420 69 6660
020 2437 6185
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