Is Employer's PF Contribution Part of CTC in ISP and Web Hosting Companies?

Dear All,

I need information about employers' contribution in PF. Is it considered as a part of CTC? Can the employer's contribution in PF be considered as a part of Cost to the Company with special reference to ISP and web hosting companies.

Regards,
Supriya
HR

Dear Supriya,

CTC is a very broad concept. You may include any costs that the organization incurs in retaining an employee in the CTC.

Regards,
Sunil Joshi

Dear Sunil,

Thank you for your reply. However, my doubt pertains to the employer's contribution in PF. Should it be considered as part of the company's cost or not? When we consider it as part of the cost, we would need to deduct PF contributions two times (from both the employer and employee sides) from the gross salary. I would like to know if there is any specification regarding this in the PF Act.

Please reply soon.

Regards,
Supriya

Hi Supriya,

PF has two parts: 1) the employee's contribution, which is 12% of the basic salary, and 2) the employer's contribution, which is 12% of the basic salary. The employer's contribution is something that the organization puts in (this is not deducted from the employee's salary). So you can add 12% of the employer's contribution into the CTC.

Hope this helps.

Thanks,
Sherine

Supriya,

In most companies, PF contribution from the employers is added as a part of the CTC, so you will find that PF has been deducted twice, but it's your contribution and the employers' contribution.

CTC - Cost to Company,

In CTC, salary distribution will be as follows:
(A) Basic Salary + HRA + DA
(B) Conveyance + Medical + Other / Special Allowance if any
(C) Employers' Contribution for PF (12% of Basic)
Employers' Contribution for ESIC (4.75% of Gross)
(D) Employees' Contribution for PF (12% of Basic)
Employees' Contribution for ESIC (1.75% of Gross)

Gross Salary = (A) + (B)
CTC = (A) + (B) + (C)
Net in Hand = (A) + (B) - (D)

Thanks and Regards,
Amol Agaskar (Senior HR Executive - HR Operations)
HRprowess

Hi,

Provident fund is calculated as 12% basic plus D.A. The PF has two parts: Employee's contribution and employer's contribution. Normally, CTC or the Cost to the company includes all the costs incurred by the company on any employee. So it should include the employer's contribution of PF.

Furthermore, for your understanding, PF is divided into two parts: Employee Provident Fund (EPF) and Family Pension Fund (FPF). The calculation goes like this: PF (12% Basic + DA) = FPF (8.33%) + EPF (3.67%).

Any further information required, please revert back.

Regards,
Avi

Dear Supriya,

PF can be added as a part of CTC (employer's share) of an employee. Only the employee's share (12%) can be deducted from their monthly gross salary.

Kindly refer to the example below where the CTC offered is Rs. 2.16 lakhs per annum:

Basic 9000.00
HRA 4500.00
CCA 1420.00
Conveyance 800.00
Education 1200.00
Gross p.m. 16920.00

PF (Employer's share) 1080.00
CTC p.m. 18000.00

In the example above, the net salary will be calculated as Rs. 16,920 - 1080 (employee's PF share) = Rs. 15,840. The employer's share of PF has been included in CTC in advance. Similarly, some companies include ESIC as a part of CTC.

Regards,
Sumeet

Hi,

Above all, the concept is good and correct. If you have any doubts, you can call me at 09840485689 (Chennai number).

Regarding your questions, you have to deduct only 12% of the basic salary from the employee (from monthly staff salary). According to the rules of PF, the employer should contribute 12%, and 1.61% for admin charges for the maintenance of the PF and Insurance Accounts. Therefore, whatever benefits are given to the employee in any form should be added to the CTC of the employee. This is the concept of PF and CTC.

Regards, Kugan Paramasivam.

Added to what others have already, I would like to add this - Employer's Contribution should be taken as part of the CTC. CTC is a concept that includes all the costs an employer incurs for an employee. Additionally, there are companies that include gratuity in the CTC. It is fair that the PF (Employer's Contribution of 12%) is taken into account. Also, the employee (depending on their pay scale) has the option to opt-out of PF. Please do not have any confusion regarding this.

Regards,
Poorna

Hi Supriya,

The PF regulations don't talk of CTC. They only talk about the contributions, which are 12% from the employee and 12% from the employer.

If our company wants to determine the cost of retaining an employee, we need to consider all the resources the employee utilizes, including the cost of floor space. This is essential for financial purposes.

The CTC figure we use for hiring purposes is meant to reveal the hidden costs the company incurs for the employee. In addition to the basic salary, we may include gratuity (which is paid only after 5 years of service), insurance coverage, transport, and meals (if provided for free or at a discounted rate).

Therefore, it is fair and acceptable to add the employer's contribution to the CTC.

Best wishes,
Sunil Joshi

Ms. Supriya,

PF contribution is a part of CTC. This may be communicated at the time of offering employment to the candidates. However, we should not deduct 24% (both employee and employer share) from the PF salary of the employee.

SYAM PRASAD

As the term itself specifies, CTC means "Cost to Company," which means it includes everything that an Employer spends on an Employee. It also includes the employer's contribution towards PF, ESI, and other benefits like a house given by the company, laptop, car, mobile phone, etc.

I hope this will help.

Regards,
Sanjeev Sharma

Hi,

I have a slight confusion regarding this as I think CTC and Gross Salary are different. CTC also includes all sorts of privileges given like fringe benefits, whereas gross salary would consist of salary with contributions to PF added.

Please share your views.

Cheers,
Paulami

Please clear my doubt about PF, whether it is 12% of basic or 12.5%. Please help me out. Anyone?

Regards,
Sameer

Hi Folks,

I have a doubt about the PF contribution. I know that the PF is divided into employee contribution and employer contribution. But my doubt is whether an employee will get a tax benefit for the employer's contribution to PF. One thing is that the employer's contribution to PF is actually deducted from my CTC.

Hope to hear from you soon.

Hi Supriya,

It's a part of CTC generally followed. In the CTC calculation, you would show (12% of the Basic) towards the PF - (employer's contribution). While explaining, you would tell the employee that his take-home would be minus all the deductions like Professional Tax, Income tax, any other component, and PF of (12% of Basic) would be deducted from his account.

Hope it's clear.

Regards,
Radhika

Hi,

Can anybody tell me the contribution of EDLIS in the PF deduction of an employee?

Regards,
Ramana Kumar

Hi! After reading all the arguments in this section, can I summarize in a nutshell? This will clear my concept, and if wrong, please correct me on this.

CTC = Gross salary + PF (employer's contribution)
Net take-home = CTC - Income tax - Professional tax - PF (Employer's contribution) - PF (Employee's contribution)
OR
Net take-home = Gross salary - Income tax - Professional tax - PF (Employee's contribution)

Please clear this out.

Regards,
Gunjan

It was good message.
I have a doubt if you can please help me?
I am working for a BPO and I got the new job offer,this is my salary annexure,
I need to know what is my take home salary after all deductions?
Please help me as I need to accept this offer and join by tomorrow...
Basic

9,000

DA

3,000
HRA

7,500
Conveyance Allnce

800
Medical Allnce

1,250
LTA

3,000
Special Allownce

5,450
Monthly Gross Salary(*)

30,000
Employer's Annual Contribution to Provident Fund

17,280
Annual Salary

3,60,000
(*)Deductions

The above Break-up excludes Statutory Deductions such as

Ø Professional Tax – Per Month
Ø Tax Deduction at Source (TDS)
Ø Employee's contribution towards Provident Fund -12% on Basic and DA

Please can you help me to know what will be my takehome salary?