PKAssociates
Dear members, Attached CTC structure that forms part of the offer letters that we have rolled out. Our questions are -

1. can we have an employee contribution of Rs.1800 shown separately as a line item in gross salary or do we need to club it with a special allowance? can we club the employee contribution of Rs.1800 in the special allowance?

2. can we have the employer contribution of Rs.1950 removed from gross salary and then from deductions as well this will have a nullifying effect?

3. can we just copy-paste the attached CTC structure into the pay slips? are there any legal roadblocks to it?

your valuable responses are sought. Thank you so much!

Regards
PKAssociates

From India, Guwahati

Attached Files (Download Requires Membership)
File Type: docx CTC Structure.docx (13.7 KB, 76 views)

PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Nanu1953
Ceo-usd Hr Solutions
Advocate Prem Chanda Yadav
Silvassa. Www.lawglobalhr.com
KK!HR
Management Consultancy
PKAssociates
Chartered Accountant

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KK!HR
1343

Your Queries are answered below at seriatim
1. The employee contribution of Rs.1800 cannot be shown in gross salary as it is a deduction made from the gross salary.

2. The employer contribution of Rs.1950 can be shown in CTC but is not generally shown in pay slips.

3. It is not proper to copy-paste the attached CTC structure into the pay slips, as it is a misleading information. The Pay Slip has to reflect the actual monthly earnings of the employee and it cannot be a notional entitlement shown as CTC. In the case of employees covered under the Payment of Wages Act 1936 or the Minimum Wages Act 1948, there are prescribed forms of wage slips by the respective State Government that have to be issued. The sample attached is not coming under those statutes.

From India, Mumbai
PKAssociates
Thank you!

In continuation to your response, there is another question

Can we add the employee contribution to the special allowance in spite of keeping it separate in the offer letter?

Are we legally allowed to do this? I do understand that the net effect of this adjustment will be the same. but employees can always make it an issue.

From India, Guwahati
ommygautam
66

CTC means cost to company .
It means at what cost any employee will be hired. In earlier this concept was not very famous among the Industry but after some time when time and scenario changes it comes in the industry.
there are 03 part of the CTC-
01. Monthly Gross - in which we add the Salary part and same thing we show in Salary slip, that's why it is known as Salary slip. the parts of the Gross salary are -
(A) Basic ( 35% to 45 % of CTC depend on company to company but should not less then Minimum wages.)
(B) HRA ( 40% for non metro city & 50% of metro city)
(C)Conveyance Allowance -1600/- fix for tax exemption (The sections under which this exemption is applicable are Section 10(14)(ii) of Income Tax Act and Rule 2BB of Income Tax Rules.) But presently In the Union (interim) Budget 2019-20, the Finance Minister has proposed to provide Rs 50000 Standard Deduction from salary income to all employees & pensioners.
The Standard Deduction of Rs. 40,000 was made available in Budget 2018 (FY 2018-19 / AY 2019-20). It replaced the transport allowance Rs. 19,200 and medical reimbursement of Rs. 15,000 per annum.
(D) Sp. All = Balance to match up CTC [(Monthly Gross + Employer Contribution ) - CTC Amount ]
(E) Adhoc Allowance- Basic - 15000/- for EPF New rules of wages
(F) Washing Allowance - 1500 to 2000 depend on company but its necessary that uniform should be provided to an employee
Total Monthly Gross = ( A+B+C+D+E)

02. Employer Contribution -
(A) EPF Contribution - 12% some company take it 13% ( it should be upto 15000/- if salary are more than 15000/- , so Basic + Adhoc shall be count for this )
(B) ESIC- 3.25% of Monthly gross except of washing allowance ( IF monthly gross is less then or equal to Rs.21000/-
Total employer Contribution = ( A+B)

total CTC = Monthly Salary + Employer Contribution .

Some other [arts which may not count in CTC-

Gratuity - Some company count it as a part of CTC but it is not legal because its a reward to an employee for giving his service in any industry for working beyond the 05 years . but you mentioned the part of CTC then you have to pay this amount during the separation.
Bonus - Bonus is depends on Profit and loss of the company , so how you can decide the amount ibefore the balance sheet final.

From India, Rudarpur
nanu1953
278

@ O B Gautam

Requesting you to clarify the followings:-

1. You have mentioned HRA should be 40% of Basic for non metro and 50% of Basic for Metro as per ITAX exemption ( you have not mentioned % on what - I hope it is on basic). There are many organizations who are paying HRA 10 to 25% of Basic at lower level employees. Moreover, there are states like Maharashtra, WB, etc. where as per State act 5% HRA on Basic & DA is statue.

2. You have mentioned Special allowance = ( Monthly gross + Employer's contribution ) - CTC. I think it will be reverse that is CTC - ( Monthly gross + Employer's contribution ). CTC is always more than the other side,

3.You have mentioned Adhoc Allowance = Basic - 15,000/- to EPF new rules of wages. Requesting you to mention particular Section/ Circular of New rules of wages ( Wage code / rules ).

4. You have mentioned EPF contribution should be restricted up to 15,000/-. But there are many organizations specially MNCs, Big Indian house etc. are paying contribution of EPF above 15,000/- for employer and accordingly matching contribution by employee.

5.You have mentioned Gratuity and Bonus should not be the part of the CTC. There are organizations and even in new labor codes - Gratuity fund is insured. Then it is essential to deposit premium every year which should be the part of the CTC. Moreover, there will Fixed term employment when working for less than 5 years -gratuity will be eligible for gratuity.

If some one is covered under the Payment of Bonus Act, then minimum bonus 8.33% should be the part of CTC.

You have mentioned that Total CTC = Monthly SALARY + Employer's contribution ( PF & ESIC) . This is also not right. There are yearly components like LTA, Retaining Allowance ( usually paid after 1 year or more ), Furnishing Allowance etc. which are also part of CTC.

CTC = Monthly gross *12 + Yearly contribution of PF, Pension if any as 3rd benefit for higher level employees + Yearly ESIC if applicable + Yearly component - LTA, Furnishing etc. + CO's Car if any, Canteen subsidy etc. as perks + Contribution to different insurance - Insurance in lieu of EDLI, Employee compensation insurance, Mediclaim etc as applicable in different organizations.

In the original post it has been mentioned that Employee portion of EPF contribution is part of CTC, which is not. CTC is the cost borne by the employer only.



S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs.in
USD HR Solutions – To Strive towards excellence with effort and integrity

From India, New Delhi
ommygautam
66

@ S K Bandyopadhyay Sir ( WB, Howrah)

1. You have mentioned HRA should be 40% of Basic for non metro and 50% of Basic for Metro as per ITAX exemption ( you have not mentioned % on what - I hope it is on basic). There are many organizations who are paying HRA 10 to 25% of Basic at lower level employees. Moreover, there are states like Maharashtra, WB, etc. where as per State act 5% HRA on Basic & DA is statue.

Dear Sir please read i had clearly mentioned HRA should be 40% of Basic for non metro and 50% of Basic for Metro as per ITAX exemption. i shared it will be the basic percentage . Second if someone is paying less then it then we cannot do any thing in fact we know that we have to pay minimum wages to our workers but after that some companies are paying less then MW.

2. You have mentioned Special allowance = ( Monthly gross + Employer's contribution ) - CTC. I think it will be reverse that is CTC - ( Monthly gross + Employer's contribution ). CTC is always more than the other side,

thanks sir you are right and but i hope it will also untestable . my simple reply for understanding .

3.You have mentioned Adhoc Allowance = Basic - 15,000/- to EPF new rules of wages. Requesting you to mention particular Section/ Circular of New rules of wages ( Wage code / rules ).
sir new wages code still pending for applicability but as per "decision of the Supreme Court in the case of ‘Surya Roshni Ltd. & Others’, (Civil Appeal Numbers: 39653966 of 2013, 39693970 of 2013, 39673968 of 2013) is a landmark judgment in the history of labour law. In what will have financial ramifications for many establishments, the Supreme Court has ruled that employers cannot segregate ‘special allowance’ from basic wages and must include it for calculation of provident fund deductions from employees and their matching contribution." that's why i wrote it and i think mostly companies are doing same practice.

4. You have mentioned EPF contribution should be restricted up to 15,000/-. But there are many organizations specially MNCs, Big Indian house etc. are paying contribution of EPF above 15,000/- for employer and accordingly matching contribution by employee.

I know even we are also covered under section 1(4) of the EPF act . So its not a big matter.

5.You have mentioned Gratuity and Bonus should not be the part of the CTC. There are organizations and even in new labor codes - Gratuity fund is insured. Then it is essential to deposit premium every year which should be the part of the CTC. Moreover, there will Fixed term employment when working for less than 5 years -gratuity will be eligible for gratuity.

Sir what i wrote is as per current scenario, as i told you NEW WAGES CODE is still pending . and for i don't think to count the Gratuity insurance premium amount as a part of CTC.

If some one is covered under the Payment of Bonus Act, then minimum bonus 8.33% should be the part of CTC.
Agreed but how can you decide the % of the bonus in the starting of the year . it may vary depending on profit and loss of the company. how can you say that we will give only 8.33% , it may be 10 , 15 or 20 whatever is come after the balance sheet finalization .

You have mentioned that Total CTC = Monthly SALARY + Employer's contribution ( PF & ESIC) . This is also not right. There are yearly components like LTA, Retaining Allowance ( usually paid after 1 year or more ), Furnishing Allowance etc. which are also part of CTC.

Sir For LTA tax exemption , employee /taxpayer can claim exemption in respect of any 2 journeys in a block of 4 years. The Income Tax Department has created block of 4 years each and in each block, the exemption can be claimed twice. But normally we have seen that employee claimed it every year so i think we have to make it as a part of normal salary.

CTC = Monthly gross *12 + Yearly contribution of PF, Pension if any as 3rd benefit for higher level employees + Yearly ESIC if applicable + Yearly component - LTA, Furnishing etc. + CO's Car if any, Canteen subsidy etc. as perks + Contribution to different insurance - Insurance in lieu of EDLI, Employee compensation insurance, Mediclaim etc as applicable in different organizations.

In the original post it has been mentioned that Employee portion of EPF contribution is part of CTC, which is not. CTC is the cost borne by the employer only.

From India, Rudarpur
nanu1953
278

Dear O B Gautam,

Thanks for your clarification. I am sorry as I have not noticed that you have mentioned HRA as % of Basic. My purpose of seeking clarification is there are lot of young stars are reading the Citehr posts and they should not be confused. CTC to my opinion is not an accurate calculation (rather not possible) as it is changing with the situation e.g variable DA, Bonus etc. payment.

Regarding HRA % you have compared with payment of minimum wages where I could not find any relation. As on date minimum wages consist of Basic, DA & HRA. All States published minimum wages as Basic & DA. There are 3 States which have State House Rent Allowance Act which is minimum 5% of Basic & DA. If any organization decides to pay minimum Basic & DA along with certain % of HRA and some other allowances (as per policy of the organization) - then there is no issue to comply MW. Income tax rebate guide line - 40% or 50% for HRA has nothing to do with MW compliance. If any organization is interested to pay more % of HRA , it is always welcome.

After reading your clarification and original post it appears to me that you have mentioned about special allowance, Adhoc allowance, Apex Court verdict which are very much confusing. For any Remuneration structure, it is not necessary that Special allowance must be a component of remuneration structure. Even if it is one component of remuneration structure, as per Apex court verdict that should be considered as part of PF gross and contribution is to be paid on it subject to maximum 15000/- per month or at any upper limit as per the policy of the organization. There is nothing special.

So far as Gratuity is concerned, there are many organizations even today who have insured gratuity with any insurance Company and paying premium every year. Whether gratuity should be part of CTC or not, there are two school of thoughts. One group feels it should not be and another group feels it should. I am in the opinion it should be because all payments are conditional. Monthly salary will not be eligible if the employee has no leave in credit and it is LWP. Bonus is paid if the employee has worked for at least 30 days in the previous year etc.

Bonus minimum amount 8.33% should be part of CTC if the employee is eligible. Yes it may be in actual more than 8.33% subject to maximum 20%. As I have already mentioned that CTC is not accurate calculation rather one tool for management for several decisions.

You have everywhere mentioned ITAX exemption clauses (LTA, HRA etc.) which has no relation with framing remuneration structure for any organization. Rather while determine different components for any remuneration structure, it is better to choose tax benefit component for taxable employees.

Remuneration Structure is random vary from organization to organization all over India specially % of Basic & DA with respect to monthly gross or total remuneration. To my opinion that is why law makers framed one uniform definition of wages( Basic & DA) in all labor codes to avoid any discrepancy across India.

Once again thanks for your post and clarification. I have tried my best to clarify it as per my experience. In law nothing is permanent rather the interpretation changes from person to person and due to different court verdict - there is always changes.

Warm Regards,


S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

USD HR Solutions – To Strive towards excellence with effort and integrity

From India, New Delhi
Advocate Prem Chanda Yadav
7

You can like 1. Basic, DA + others(specify) 2. Gross 3. Employer Share(Like PF + ESIC + Bonus etc What ever available as per your judication) 4. CTC
From India, Mumbai
PKAssociates
Dear all,

my question was

we have separately shown employee contribution as a line time in the offer letter instead of clubbing it with special allowance; this was done to ensure better clarity with respect to contributions.

1. can we now club the employee contribution with the special allowance in the salary slip? or can an employee raise an issue on this?

We will club the employee cont. with the special allowance in the employment contract.


Requesting esteemed members to guide us.

From India, Guwahati
Advocate Prem Chanda Yadav
7

this question ask your self. Answer is in your question.
From India, Mumbai

If you are knowledgeable about any fact, resource or experience related to this topic - please add your views.








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