Robindt1
Asst. Manager - Hr
Raj Kumar Hansdah
Shrm, Od, Hrd, Pms
V. Balaji
Ir & Hr
Smbhappy
Finance, Hr, Sectarial Practices, Law And
Yagniah
Legal, Personnel Admn. And Hr
Shish
Consultant
+5 Others

Dear Members,
Greetings !!
Please guide me, whether mobile allowance given to any employee can be a part of his CTC or not i.e. he / she has to use his own mobile (SIM) and the company will pay it as fixed amount in his salary.
please revert...
3rd December 2010 From India, New Delhi
Hi Robind ,
Whether it can be included or not solely depends upon that particular Org.
As far as my knowledge is concerned if you want to do it, I don't find any problem doing that because now a days even gratuity is included in CTC , which is not a good thing as far as Employees are concerned.
Hope this answer has served ur purpose.
With Regards ,
Sarkar
MBA,Phd(HR),SAP ( HR)
3rd December 2010 From India, Bangalore
Dear robindt1 In your company, is it a "benefit" or by way of "reimbursement" for making official calls or calls related to official business ??
3rd December 2010 From India, Delhi
My dear Sarkar
I appreciate your enthusiasm.
What is the policy in your organization regarding "Expenses on official tours" ?
For example, when a sales person visits a number of cities, he travels (by air or train), stays in a hotel (specified according to his level), spends in taxi/travel etc.
Do you consider all this expenses as his income/part of salary ??
Do you add all these to the CTC ??
Would not that mean all expenses made by an employee in connection with business are not "business espenses" ?? Is not there a fatal flaw in such thinking ??
I suggest you consult your Finance & Accounts people on some clarity on these expenses and how they are treated financially and in account books.
Kindly re-consider your opinion.
Regards.

3rd December 2010 From India, Delhi
Hi Raj ,
Well in my Company we have certain criteria which are fixed as far as Expenses ( Hotel/Train etc) are concerned .
The concerned employee is made aware of this rules during the Induction period , so he/she knows what is his/her Limit regarding the expenses are concerned.
And yes we add this expenses on his/her CTC .
Hope I have answered your Queries.
Kindly let me know if you need to know anything else.
With Regards ,
Sarkar
4th December 2010 From India, Bangalore
Dear Sarkar

Thanks for your reply.

So your company adds any expenses that an employee undergoes while working for company in his CTC !!

It is not only unfair but illegal as well. I wonder how much it inflates the CTC and makes it un-realistic. For example, especially in Marketing and Sales, employees (Regional Manager/Area manager etc.) are always on the move and entitled for air-fare and at least three star hotels.

In a month a typical Sales/Marketing executive may run up such bill amounting to more than five times of his total salary in a month.

Remember, this money does not go into the pocket of the employees; but are the official expenses incurred during business.

In any books of management, such expenses are called SELLING/MARKETING expenses and are accordingly shown into PROFIT & LOSS ACCOUNT of the Company which are prepared and audited by Chartered Accountants.

In the Balance sheet, Net Profit is the amount derived after deducting these expenses. Such expenses, therefore, are Tax deductible.
Showing these expenses anywhere else would be violative of the INDIAN COMPANIES ACT 1956 and the following Accounting Standards which have legal recognition under the Act :

AS 1 : Disclosure of Accounting Policies

AS 3 : Cash Flow Statements

AS 5 : Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

AS 15 : Employee Benefits

AS 21 : Consolidated Financial Statements

and perhaps several others.
Please note, such expenses CAN NOT be added to the CTC of an employee.

CTC or Costs To Company does not mean to add all cost which are necessary to run the business, to be added up in the employee's account.

For example, one can not add the Cost of a Crane as CTC of the Crane Operator, or the Cost of a Machine as CTC of the machine operator.

As suggested earlier, kindly verify the facts with your Chartered accounant/Company Auditors.

For convenience, you can take a print-out of this, and discuss with them. Hope they will convince you. Moreover, these are not added to the CTC. Have you ever seen a CTC statement that includes all this official tour expenses ??

HR professionals need to be more knowledgeable and keep upgrading themselves.The reason HR professionals get comparatively lower salaries than CA or CS is simply lack of knowledge and skill; and also that CA/CS have a common professional rigorous curriculum administered by an Apex body and recognised by the Government. Consequently, a Finance professional knows more about HR processes and system than a person claiming to be an HR professional, knows about the financial matters related to employees - a situation which I fervently hope would be addressed in future.

Warm regards.
5th December 2010 From India, Delhi
Dear robindt1



My idea behind my earlier query was to make you understand the difference between an "employee benefit" and a "reimbursable expense".



Since the employee is already using his own SIM and mobile; any flat sum given to him every month and no restriction on calling his family, friends etc. (without the requirement of production of bills), will definitely be a "benefit" and therefore, a part of CTC.



However, any amount given towards expenses for business calls only should not be a part of CTC.

For example, some companies pay a fixed sum towards employees personal mobile/telephone expenses, which are part of CTC. In addituion, the company gives them a separate mobile (the cost of which is as per eligibility) with a company procured SIM (having similar numbers and Group DIalling Facility) for office use. This mobile should always be kept switched On, and the bills (within limit/approval) are paid by the company itself (or reimbursed).

Such mobile expenses should not be a part of individual CTC, as they come under business expense under the Accounting head like "Administrative & Selling expenses".



Hope the concept is clear to you; which was my intention.

How it is done in your company is another matter altogether; as companies have their own ways of doing things, irrespective of the fact whether it is legal or not; proper or not.



Warm regards.






5th December 2010 From India, Delhi
I agree with Sh Raj Kumar in totality. HR should and must understand difference between Business Expenses and Employee Benefit. All expenses towards Official Work are part of Business expenses.
Regards,
HC Nagar
5th December 2010 From India, New Delhi
Dear
telephone or mobile phone is given to certain people who need to frequently communicate with their superiors, colleagues or the business associates. Without this facility one cannot perform his duty as sales executive,field engineers, etc.
Secondly, the money what one spends on this, is not going to his pocket.
Hence this need not be considered as part of CTC.
V. Balaji
5th December 2010 From India, Madras
I fully agree with the observations made by Mr. Raj Kumar. Perhaps, your exhuberance has had the better of you and you seem to have been swayed by vigours of your enthusiasm when posting your response.

In the instant matter, the Mobile Allowance if treated as a Fixed Allowance and is reflected on the Pay Slip and paid ass part of Salary, then yes it will be construed as being part of the CTC.

On the other hand if expenses against use of Mobilephones for official work is reimbursed aginst bill raised for the same, it will NOT be part of the CTC.

Gratuity should not be treated as part of CTC since the employee will be entitled for the same ONLY after he completes five years in the organization.

Vasant Nair

5th December 2010 From India, Mumbai
Even if you have fixed allowances to meet expenses for train journey or to meet expenses for stay in a hotel when on official tour, such expenses should not be treated as part of the CTC. These are expenses an employee incurs when he goes on tour for official work and should be so treated as Reimbursements.
The limits for travel etc..are designed and defined for budgetary purposes and to limit expenses on official tours.
You may wish to advise your management accordingly to maybe revise the Policy of Official Travel and Outstation Visits for official work.
Vasant Nair

5th December 2010 From India, Mumbai
Dear Friend,
CTC means cost to the company i.e., the compensation in different components payable to its employee for hiring his services. It varies from company to other.
The reimbursement of phone bill to a fixed amount can be treated as part of CTC.
Normally the following will be part of CTC.
BASIC SALARY,
HRA,
CONVEYANCE,
LTC,
BONUS,
SPECIAL ALLOWANCES LIKE, BOOKS AND PERIODICALS, DRIVER ALLOWANCE, PETROL EXPENSES,
MEDICAL REIMBURSEMENTS.
Apart from the above, statutory contributions like
Provident Fund, Gratuity
Hope this clarifies
Regards
5th December 2010 From India, Hyderabad
Hi Robin,
It is to be decided at sole discretion of the organisation.
But when it comes ctc, the organisation can cover other allowances other than statutory.
So it can be considered as a part of CTC.
Ashish
5th December 2010 From India, Mumbai
Hi Mr Raj Kumar ,

Well thanks for the advise , but I feel my top management knows what is better for their Employees.
And Secondly as i think that you are much more experienced than me , but still I feel you should keep your advise among yourself.
Our HR HEAD and VP HR knows better than you and Trust me I know it completely.
To say that what is legal or illegal is not right as far as I believe.
I assume that your point of opinion is coming from one industry , But as I work in a IT company we don't have Sales Manager/Regional Manager ( I think You have in your Company) we have a Client Acquisition team which handles the Business development of our Company.
And as I told earlier we have maintained certain parameters/Limits to curb the misuse of this inclusion.
And I don't think our employees are dumb enough to work in a Company where the CTC is not upto the mark.

We dint join this forum to criticize each other company ( Mine is One of the Best known IT product MNC
- That goes to specifically to Mr Raj Kumar ) but to share knowledge.
I had told my opinion , people can always argue with a better solution , But I am sure they don't have any right to say " What is legal or Illegal "
I just advised Robin , what I thought was correct according to my knowledge.


To my other friend -

I also know that a person gets Gratuity only after 5 years but if you have the patience of reading my post , then I just told that some Company use it to Inflate their CTC.

To All my friends and Specially Mr Raj Kumar -

Although I don't think that I should give any Explanation but still I feel I should make my stand clear and precise.
As " hiashuhrm " rightfully said that Formulating CTC totally depends upon that company , but when it comes to our company we Include it as because our CTC is much more higher as compared to our Industry peers .

To quote an example -
If Company - ABC has a CTC of 500000 PA in place for their Business Analyst we as XYZ has a CTC of 650000 pa for the same profile.
So basically it means that the Employee is well aware of the inclusion of expenses in CTC as he knows after deduction still he is getting more than his peers.

Hope now all my friends have got the picture clearly.
And Mr Raj Kumar - kindly please check your words before commenting something
Being a HR ( I assume you are ) one should be more careful with their words.

With Regards ,
Sarkar
5th December 2010 From India, Bangalore
We have mobile reimbursement for employees as per entitlement defined as per the grade of the employees. The personal calls amount has to be deducted by the employee while claiming the reimbursement.

5th December 2010 From India, Gurgaon
Rajkumar ji, you have a very vast experience of this field and very well explained by you. Thanks & regards, shish ram uniyal compliance consultant 096811681660
5th December 2010 From India, New Delhi
Mr.sarkar,
you are totally wrong at your part. Mr rajkumar ji not only experience of one industry but all type of industries shop & estb., factories, it etc.
Whatever you company it is never been matter of us but we guide others so that they can not do this kind of mistakes in their ctc as you are doing, it is specially not for you but for all others who is new to this forum.
Shish ram uniyal
5th December 2010 From India, New Delhi
My dear Sarkar



Thanks for your reply; which very nicely reflects your opinion and attitude.



Kindly go through my earlier post again. The example quoted therein are just examples to make the concept easy to understand and not taken from my or any other specific company.

The Sales/Marketing example was taken, as they are mostly on tour/travel. However, all these travel expenses (which are undertaken for company business) do not form a part of CTC; as these do not go in the pocket of the employee - lijke in the case of LTA/LTC; but are merely reimbursement of expenses incurred for company work.

The facts quoted therein are facts, that can be verified with any knowledgeable person or an expert like a good CA/CS or even the knowledgeable HEAD and VP - HR of your esteemed company.



I am sure you have not referred the matter to them, else they would have told you what is right.



The fact remains that :
The expenses incurred by any employee in connection with company business/work such as Official tours (including travel, boarding & lodging, incidental expenses in connection with the work); are never a part of CTC.

Please try to understand what CTC (Cost to Company) means and what it includes.



If still you have any doubts on this, you should clarify it from your own seniors. I do not think a senior person who understands these aspects would have a different opinion.



We are here, definitely, to share knowledge, and that is why my emphasis on facts, and legalities.



Do think again on this without getting unduly charged up in anger !!

Declaring the questionable policies of your company, the supposed concurrence of your HEAD/VP-HR and your salary information in a public forum, is not proper, you could land in problem if words get back to your organization.



Warm regards.








6th December 2010 From India, Delhi
Mr. Sarkar,

Mr. Raj Kumar has placed his view i a very scientific manner for treating the expenses and employee benefits in the light of the exiting law and standard accounting practices, as laid down by the Companies Act, as a well as by the Institute of Chartered Accountants of India (established by a law of parliament). No company is allowed to do the things which are not permitted by law.

If your Company Secretary o the Chartered Accountants are not looking into this and are depicting the expenses and benefits into inappropriate head of accounts, they are not depicting true and fair view of accounts.

Mr. Raj Kumar has quoted various Accounting Standards, which guide the Industry as well as auditors as to how the financial entries/transactions need to be treated in the books of accounts.

Mr. Raj Kumar has rendered a good piece of advise to refer to your Finance Department for further clarification. You seems to be a non finance person, and you have unnecessary gone furious about the advise given be Mr. Raj Kumar.

Ramalingam Raju had a formidable Satyam. But see what he was doing. I am not suggesting that your company bosses are doing the same, but may be they are ignorant or misled. If your company do not mend, it could be in trouble some day.

I assume that your company, in a grab to show the best pay master in the industry are wrapping inappropriate amounts in the CTC (as is evident from the example of CTC given by you in your post).

But beware, the actual salary is that, what an employees carries home and gets as perks or long term deposits, like PF, etc. Rest all are the business expenses of the company attributed to employees inappropriately.
6th December 2010 From India, Chandigarh
My Dear Friend,

You aggressive response to the explanation of the issue posted by Raj has made me sit up!!!!

I can only say that you have been extremely childish and uncharitable in actually rebuking someone senior and knowledgeable as Raj.

You should actually thank him for the fine details that he as posted on the matter under discussion.

6th December 2010 From India, Mumbai
I agree with you totally. Very nicely put. Raj has explained the issue at hand so beautifully and in good detail. Sad our friend could not appreciate it in the desired perspective. Vasant Nair
6th December 2010 From India, Mumbai
Dear Mr. Raj ,
Thanks a lot for the information. In our company we give a fixed amount (say - 1500 / month) which he can utilise both for his family purpose and official purpose by using his own no., incse if he uses a company Sim then whatever bill comes beyond 1500 that gets deducted from his salary and if if bill comes below 1500 the same gets credited in his salary.
I hope its proper and legal, kindly advice.
21st December 2010 From India, New Delhi
My dear Robindt1

My efforts are primarily directed towards creating an awareness and understanding of the various issues in HRM. I understand the problem and constraints that is faced by an HR. It is good that you have raised this issue and it helps in clarifying matters. Having the "knowledge and expertise" is one thing and being empowered to "apply" it is another. But it is always better to be 'informed' even while making a 'forced decision'.

We already know how companies try to BUNDLE everything they can, to make for a MORE ATTRACTIVE CTC.

Now, we have also discussed, what constitutes a 'benefit' or a 're-imbursible official/business expense'.

It would definitely be a benefit extended and a part of CTC, if companies give mobile expenses for personal use.

However, we are aware that companies do so primarily for official use. It is incidental that some employees also use it "by design/wilfully" or "out of nescessity" for personal use.

Hence, ideally such telephone/mobile expenses should be out of the purview of CTC. But by bundling personal use, a "grey area" is created.

Since the amount is not too atrocious, and considering far more outrageous things are included in CTC; you can make your own decision to the extent you are empowered to. Now that you fully understand the nature of the issue and its implications, you can make an informed choice.

(As far as legalities are concerned, on this issue; there are no specific guidelines or directions).

Warm regards.
22nd December 2010 From India, Delhi
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