Dear HR Managers,
Good morning! I am working as an HR Manager at a reputed hospital in Central Delhi. My management wants me to redefine the company's costs to the employees by adding various factors like gratuity, leave encashment, etc. Gratuity is applicable to an employee only after completion of 5 years of continuous service. I am a little confused about how to calculate the same for new employees.
I am waiting for your valuable feedback on the subject.
Thank you.
Sreehariprasad N. Manager HR DHLI
From India, New+Delhi
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2Good morning! I am working as an HR Manager at a reputed hospital in Central Delhi. My management wants me to redefine the company's costs to the employees by adding various factors like gratuity, leave encashment, etc. Gratuity is applicable to an employee only after completion of 5 years of continuous service. I am a little confused about how to calculate the same for new employees.
I am waiting for your valuable feedback on the subject.
Thank you.
Sreehariprasad N. Manager HR DHLI
From India, New+Delhi
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Dear Sreehariprasad,
Had you searched CiteHr, you would have found some discussions at https://www.citehr.com/48148-calcula...mpany-ctc.html. It all depends upon your company policy, as someone said.
Have a nice day.
Simhan
A retired academic in the UK
From United Kingdom
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Had you searched CiteHr, you would have found some discussions at https://www.citehr.com/48148-calcula...mpany-ctc.html. It all depends upon your company policy, as someone said.
Have a nice day.
Simhan
A retired academic in the UK
From United Kingdom
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CTC is normally a combination of 3 main heads:
a) Fixed Annual CTC
b) Variable/Incentive/Performance Bonus
c) Other Benefits/Perquisites
a) Fixed Annual CTC generally consists of Basic, HRA, Special Allowance, Medical Allowance, Conveyance Allowance, and various other allowances, Superannuation, LTA, etc.
c) Other Benefits include Vehicle facility, Housing Facility, Gratuity, Mediclaim Insurance, Personal Accident Insurance, Mobile/Residential Telephone facility, etc.
Components a & b can be quantified easily. However, for Other Benefits like a vehicle, phone, housing, you can consider the actual amount paid by the company, premium paid individually for insurance, gratuity can be quantified as (15 days basic/26) * 30 for a year. Although the same is not being paid by the organization but the company is paying to the trust to make a provision for the same. Similarly, for Leave encashment, you can obtain provisional figures from your Finance & Accounts department as booked by them in their books of accounts.
Hope this information will help you.
Regards
From India, Mumbai
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a) Fixed Annual CTC
b) Variable/Incentive/Performance Bonus
c) Other Benefits/Perquisites
a) Fixed Annual CTC generally consists of Basic, HRA, Special Allowance, Medical Allowance, Conveyance Allowance, and various other allowances, Superannuation, LTA, etc.
c) Other Benefits include Vehicle facility, Housing Facility, Gratuity, Mediclaim Insurance, Personal Accident Insurance, Mobile/Residential Telephone facility, etc.
Components a & b can be quantified easily. However, for Other Benefits like a vehicle, phone, housing, you can consider the actual amount paid by the company, premium paid individually for insurance, gratuity can be quantified as (15 days basic/26) * 30 for a year. Although the same is not being paid by the organization but the company is paying to the trust to make a provision for the same. Similarly, for Leave encashment, you can obtain provisional figures from your Finance & Accounts department as booked by them in their books of accounts.
Hope this information will help you.
Regards
From India, Mumbai
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Dear Sreehariprasad,
Regarding your query:
Normally, the provision of Gratuity is booked in the books of accounts because it is a liability for the company. The calculation of gratuity in CTC on a monthly basis is that 4.81% of basic will go to gratuity accumulation.
As for encashment of leave, establish a policy that specifies the maximum number of days that can be encashed in a year, regardless of the accumulated leave. This restriction will aid in determining the amount to be reserved for encashment. Alternatively, if you need to calculate the entire leave encashment, compute each employee's outstanding encashable leave and compile them for provision in the books of accounts.
I hope this is clear. Wishing you all the best in your HR career.
S. Sethupathy
Excellent HR Services
Erode.
From India, Selam
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Regarding your query:
Normally, the provision of Gratuity is booked in the books of accounts because it is a liability for the company. The calculation of gratuity in CTC on a monthly basis is that 4.81% of basic will go to gratuity accumulation.
As for encashment of leave, establish a policy that specifies the maximum number of days that can be encashed in a year, regardless of the accumulated leave. This restriction will aid in determining the amount to be reserved for encashment. Alternatively, if you need to calculate the entire leave encashment, compute each employee's outstanding encashable leave and compile them for provision in the books of accounts.
I hope this is clear. Wishing you all the best in your HR career.
S. Sethupathy
Excellent HR Services
Erode.
From India, Selam
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Dear Sree,
TOTAL COMPENSATION AS A PERCENTAGE OF REVENUE
The Total Compensation as a Percentage of Revenue factor is an indicator measurement that is used to monitor labor costs. Tracking total compensation as a percent of total costs provides managers with valuable information for use in managing the costs associated with human capital, including evaluating the use of fixed versus variable compensation. Following this measurement will also permit an organization to determine if personnel costs (as indicated by base pay, incentives, and benefits) are in line with organizational goals, industry benchmarks, and business plans.
Total Compensation as a Percentage of Revenue = (Compensation Cost + Benefit Cost [Workforce on Payroll]) / Revenue
BENEFIT COST AS A PERCENTAGE OF REVENUE
The Benefit Cost as a Percentage of Revenue factor is an indicator measurement that is used to monitor non-taxable/non-cash labor costs. Tracking benefit costs as a percent of revenue provides managers with valuable information for use in managing the costs associated with human capital. The total financial impact of new programs such as wellness efforts or insurance plan design can be evaluated in relation to revenue. Trends up or down in this factor will reveal costs that need attention or value that has been added. Following this measurement will also permit an organization to determine if the benefit labor cost (as indicated by non-taxable/non-cash benefits) is in line with organizational goals, industry benchmarks, and business plans.
How is it Calculated?
Benefit costs are totaled and then divided by either period actual or budgeted revenue for a calendar, fiscal year, or another 12-month reporting period.
Benefit Cost as a Percentage of Revenue = Benefit Cost / Revenue
BENEFIT COST AS A PERCENTAGE OF TOTAL COMPENSATION
The Benefit Cost as a Percentage of Total Compensation is an indicator measurement that is used to monitor non-taxable/non-cash labor costs. Tracking benefit costs as a percent of total compensation provides management with valuable information for use in managing the costs associated with benefits. This information can be useful when looking at hire versus lease or outsource decisions. Trends up or down in this factor will reveal costs that need attention or value that has been added with increasing relative costs.
How is it Calculated? Benefit costs are totaled and then divided by total costs for a calendar, fiscal year, or another 12-month reporting period.
Benefit Cost as a Percentage of Total Compensation = Benefit Cost / Total Compensation Cost
VARIABLE COMPENSATION AS A PERCENTAGE OF TOTAL COMPENSATION
Variable compensation as a percentage of total compensation is a measurement that demonstrates how much of an organization's total compensation can vary with the revenues of the organization. Recent compensation trends have focused on increasing the amount of variable compensation. High levels of variable compensation can be correlated to high-performing organizations and organizations that attract and retain high-performing employees. This measurement permits an organization to look at the success of variable compensation programs and fixed and variable compensation as it relates to revenue.
How is it Calculated?
Variable compensation as a percentage of total compensation is calculated by adding up all variable compensation and dividing that sum by total compensation.
Variable Compensation as a Percentage of Total Compensation = Variable Compensation / Total Compensation
The information as above is easily available online. Just look for HR Metrics.
Regards, Octavious
From India, Mumbai
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TOTAL COMPENSATION AS A PERCENTAGE OF REVENUE
The Total Compensation as a Percentage of Revenue factor is an indicator measurement that is used to monitor labor costs. Tracking total compensation as a percent of total costs provides managers with valuable information for use in managing the costs associated with human capital, including evaluating the use of fixed versus variable compensation. Following this measurement will also permit an organization to determine if personnel costs (as indicated by base pay, incentives, and benefits) are in line with organizational goals, industry benchmarks, and business plans.
Total Compensation as a Percentage of Revenue = (Compensation Cost + Benefit Cost [Workforce on Payroll]) / Revenue
BENEFIT COST AS A PERCENTAGE OF REVENUE
The Benefit Cost as a Percentage of Revenue factor is an indicator measurement that is used to monitor non-taxable/non-cash labor costs. Tracking benefit costs as a percent of revenue provides managers with valuable information for use in managing the costs associated with human capital. The total financial impact of new programs such as wellness efforts or insurance plan design can be evaluated in relation to revenue. Trends up or down in this factor will reveal costs that need attention or value that has been added. Following this measurement will also permit an organization to determine if the benefit labor cost (as indicated by non-taxable/non-cash benefits) is in line with organizational goals, industry benchmarks, and business plans.
How is it Calculated?
Benefit costs are totaled and then divided by either period actual or budgeted revenue for a calendar, fiscal year, or another 12-month reporting period.
Benefit Cost as a Percentage of Revenue = Benefit Cost / Revenue
BENEFIT COST AS A PERCENTAGE OF TOTAL COMPENSATION
The Benefit Cost as a Percentage of Total Compensation is an indicator measurement that is used to monitor non-taxable/non-cash labor costs. Tracking benefit costs as a percent of total compensation provides management with valuable information for use in managing the costs associated with benefits. This information can be useful when looking at hire versus lease or outsource decisions. Trends up or down in this factor will reveal costs that need attention or value that has been added with increasing relative costs.
How is it Calculated? Benefit costs are totaled and then divided by total costs for a calendar, fiscal year, or another 12-month reporting period.
Benefit Cost as a Percentage of Total Compensation = Benefit Cost / Total Compensation Cost
VARIABLE COMPENSATION AS A PERCENTAGE OF TOTAL COMPENSATION
Variable compensation as a percentage of total compensation is a measurement that demonstrates how much of an organization's total compensation can vary with the revenues of the organization. Recent compensation trends have focused on increasing the amount of variable compensation. High levels of variable compensation can be correlated to high-performing organizations and organizations that attract and retain high-performing employees. This measurement permits an organization to look at the success of variable compensation programs and fixed and variable compensation as it relates to revenue.
How is it Calculated?
Variable compensation as a percentage of total compensation is calculated by adding up all variable compensation and dividing that sum by total compensation.
Variable Compensation as a Percentage of Total Compensation = Variable Compensation / Total Compensation
The information as above is easily available online. Just look for HR Metrics.
Regards, Octavious
From India, Mumbai
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User input:
You have following three options while considering cost of gratuity in CTC. Discuss these options with your Management and come to some conclusion.
Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, only in case of those employees who have completed 5 years service.
Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, in case of all employees irrespective of their length of service. This is more realistic since gratuity is payable even before completion of 5 years service, in case of death of employee.
In case you have taken a Group Gratuity Scheme Policy from LIC or any other insurance company, then add the policy Premium paid by you to CTC by proportionately allocating it to individual employees.
Corrected Text:
You have the following three options to consider the cost of gratuity in CTC. Discuss these options with your management and come to a conclusion.
1. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, only in case of those employees who have completed 5 years of service.
2. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, in the case of all employees irrespective of their length of service. This is more realistic since gratuity is payable even before completion of 5 years of service, in case of the death of an employee.
3. In case you have taken a Group Gratuity Scheme Policy from LIC or any other insurance company, then add the policy premium paid by you to CTC by proportionately allocating it to individual employees.
From India, Pune
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You have following three options while considering cost of gratuity in CTC. Discuss these options with your Management and come to some conclusion.
Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, only in case of those employees who have completed 5 years service.
Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, in case of all employees irrespective of their length of service. This is more realistic since gratuity is payable even before completion of 5 years service, in case of death of employee.
In case you have taken a Group Gratuity Scheme Policy from LIC or any other insurance company, then add the policy Premium paid by you to CTC by proportionately allocating it to individual employees.
Corrected Text:
You have the following three options to consider the cost of gratuity in CTC. Discuss these options with your management and come to a conclusion.
1. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, only in case of those employees who have completed 5 years of service.
2. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, in the case of all employees irrespective of their length of service. This is more realistic since gratuity is payable even before completion of 5 years of service, in case of the death of an employee.
3. In case you have taken a Group Gratuity Scheme Policy from LIC or any other insurance company, then add the policy premium paid by you to CTC by proportionately allocating it to individual employees.
From India, Pune
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Employee Benefits.doc