Is the 1.61% PF Administration Charge Part of CTC? Seeking Clarity

Dear Seniors,

Can anybody tell me if the administration and EDLIS charges contribution of PF (1.61%) can be part of CTC?

Regards,
Sandeep Kumar
sandy_1136@rediffmail.com

Hi Sandeep,

Admin and EDLI charges on the PF being deposited are paid by the Employer, which may classify it as a cost and add to the CTC of an Employee. However, please note that this amount cannot be recovered from an employee's salary, and the CTC should not hint that it is being paid by the Employee.

As a side note, why do you wish to add this cost to the CTC? If the Employer wants to mention all costs in maintaining an Employee to the CTC, what about Electricity Charges, or Stationery usage charges, or Tea-Coffee? My personal opinion is that it is absurd to include indirect costs in an Employee's CTC.

Without prejudice,
Neeraj K Singh

Hi,

Can you explain how final settlement is calculated when PLI is included in the CTC?

Regards,
Likki

Dear Sir,

One of our colleagues has an offer letter in which PF, EDLIS, and admin charges are mentioned as part of the CTC. That's why I am submitting my query.

Thanks,
Sandeep Kumar

It depends from company to company. But since 12% of company contribution is generally shown as a CTC component, it is normally taken into account that the remaining 1.61% will also add to CTC, since the amount is very less.

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It varies from company to company. However, since 12% of the company's contribution is typically presented as a CTC component, it is usually assumed that the remaining 1.61% will also be included in the CTC calculation, given that the amount is very minimal.

Please do not add 1.61% to the CTC of the employee as this is only a cost of the company, not the cost to the company for an individual employee.

Regards

Legally, there are no specific guidelines mentioning what will be a part of CTC and what will not be. (Please correct me if I am wrong.) It depends on the company to decide what they include in CTC, but as per market practice, certain components are not considered part of CTC.

No, in fact, the 12% of the P.F. will be included in CTC, but not the Admin Charges as it is to be borne by the employer. It's not the P.F. deduction (12%); it is only the admin charges on P.F.

Dear Sandeep,

As you have mentioned, one of your friends received an offer letter in which the employer stated that EDLI and admin charges would be included in CTC. It is totally wrong and illegal. CTC is an internal matter that should not be disclosed in writing to any employee. You cannot deduct the employer's share of PF from an employee's salary, as clearly stated in the act. Why should an employee be concerned about the administration charges of PF? Does it mean that if I am sitting in an air-conditioned room, spending about 150 rupees on electricity per day, and having tea three times a day, then those costs should also be included in my CTC?

Some companies include gratuity in CTC, which seems nonsensical. If an individual works for only two years, who will pay the gratuity since they are not entitled to receive it? This would amount to cheating.

You can mention in the appointment letters that legal dues are deducted from the salary.

Thank you,
J S Malik

Dear Mr. Malik,

I have my appointment letter wherein the gratuity amount is clearly mentioned in the CTC. Kindly advise me if I can claim it when I take my full and final settlement. This amount is calculated based on my basic salary, and I have been working here since 2007. I have already submitted my resignation to the company with the required notice period.

Thank you.

Dear Mr. Malik,

In our company, we issue CTCs including PF, Gratuity, and Superannuation to employees. You mean to say this is not the Cost to Company of an employee but the Cost of Company to be incurred by the company in regards to the employee. Then how to calculate the actual CTC by an employee? Please guide me.

You may either email me at bhakti.bade@gmail.com.

Thank you.

Dear Mr. Sandeep,

There is nothing written in the law about CTC. I slightly differ from respected Mr. Malik in that an employer cannot show his own share in the CTC package. During the fixation of the compensation package, the company always calculates the monthly and yearly packages of employees with their knowledge and consent regarding their structure and liabilities. Moreover, negotiations take place in this way so the company can easily calculate how much each employee costs. However, regarding the 1.63%, it has not been seen yet. Initially, it can be included to calculate the CTC of an employee.

I am working with a retail company now. We do not add such charges in the CTC of any salesman or manager; it's up to you and your company if you want, you may add such costs in the CTC. However, these are very nominal costs which companies generally do not add.

Regards
:)