Struggling with CTC Clarity? How to Make Salary Breakups Clear for New Joiners

Hi All,

We are following the concept of CTC in our organization, and the main components of the same are:

1. Basic salary
2. HRA
3. Medical
4. Transport allowance
5. Compensatory allowance
6. PF contribution by the employer

The grand total of this is CTC; the deductions are towards PF only for employee contribution.

Now, the problem I am facing is that the format I am using as a salary breakup annexure doesn't seem to be well received by new joiners, and they fail to understand the concept of CTC, especially the fact that PF contribution by the employer is part of CTC. Could you please help in sharing the information on the same, as to the good format that should be given with the appointment letter.

Also, related to this is the pay slip to be given every month. We are not including PF contribution by the employer in the monthly payslip and taking the rest of the amount as Gross salary.

Is there any way where we can show the employer contribution also in the pay slip? Is it mandatory to do that?

Please advise!!

Best Regards,
Anu B

Hi CTC!! -- the misnomer!

The term "cost to company" has come to be used in common parlance when we talk about a pay packet. This hitherto was considered as what one would get in his 'pay cover', be it cash or cheque. Attached to this was the 'pay slip' giving details of the rate of wages [basic + DA + other components] with deductions such as EPF, ESI, LIC, LOANS, ADVANCES, PT. This was calculated based on the number of days worked in that calendar month. [This was provided as a format under the Minimum Wages Act]

During the last decade, the trend changed. The cost per employee, i.e., the total expenses direct and indirect that a company would incur for retaining the employee, was calculated. This included salary, Employers' contribution on EPF, ESI, Gratuity, excess leave allowed other than the statutory allowed, Bonus in excess of the statutory, etc., and the final figure shown/offered as "CTC" to the employee.

The visibility of the employer's share was made prominent. This Exercise is not understood by many as the basic thought lingering on the mind "MONEY IN THE COVER" -- the difference in the payment received from his/her previous employer might be marginal or in some cases less... so the feeling of 'BEING CHEATED' arose and the PR exercise for the HR began.

Most employers, to get over this area of anomaly, have given the details more LUCIDLY with workings and exact take-home amount. The adding of the EMPLOYERS' SHARE is shown clearly and how it is disbursed - monthly/Quarterly/annually.

It is always cheerful to remember this offer document is doing THE PUBLIC RELATIONS for your company. The letter is being looked at by many, and the peer talk should not send the wrong signals about the company!!!

hrg-rajaram

Hi,

I have to prepare the salary slip for my top management. Kindly help me and give me suggestions on what headings or components to use in fixed and variable headings.

Regards,
Sak :(