Dear Friends,
Our member Nathrao has correctly mentioned that CTC package should be carefully read by the new joinee and then only accept the offer.
But the new joinee does not know what is CTC means or what is the difference between CTC & salary. In one of the very old post of mine I had mentioned that the HR fraternity itself is confused on this concept. Under the circumstance,how we can expect the employee to understand the CTC concept. I have seen at many places that employees are confused on this aspect by HR guys .
Senior member Shri. Umakanthan has rightly said that CTC is the sum total of every component of expenses both direct and indirect incurred by the employer towards an employee on actual and accrual basis.
I have written on CTC in many posts earlier. I wish to write it again in addition to what Shri. Umakanthan has said.
CTC is not salary. CTC is a concept. It is a total "Cost To Company" on engagement of an employee at actual and accrued.
Cost of Gratuity is included in CTC towards the provisions of gratuity liability. The employer is liable to make the provision of the liability towards Gratuity in his books of accounts on the basis of working by actuary . Alternatively, the employer has to take Gratuity Policy. When employer takes gratuity policy, he has to pay the premium on account of every employee from date of joining itself. This premium is also based on working by actuary covering every employee whether he completes 5 years of service or not.
There is no wrong if employer takes gratuity liability in CTC. But Gratuity is payable to employee only after completion of 5 years of continuous service except in the case of death. This has to be explained by the company or HR guy to the employee.
To avoid any ambiguity, my advise is to mention in the foot note of CTC Structure that the Gratuity is payable only after completion of 5 years of continuous service and there shall be no refund of money taken as Gratuity liability in CTC if employee leaves the services before completion of 5 years of continuous service.