Understanding CTC and Conditional Payments
I state once again that there is no law on the subject and that CTC is just a tool for budgeting manpower costs. In simple terms, it means the money the organization spends on or for an employee. It is expressed either as a monthly figure or as an annual figure.
We must be reasonable enough to treat "conditional payments" paid monthly (like incentives), annually (commissions, bonuses, etc., by whatever name called), or at larger periods (loans, insurances, gratuity, etc.) carefully.
When CTC is used to bargain salaries, care must be taken not to lure the candidate with a high CTC figure. When the candidate finds out at the time they leave and these benefits are denied to them, there will be considerable negativity generated in the organizational atmosphere. The best example is gratuity. It is normally and by law payable only upon completing five years of continuous service. If the employee leaves before completing five years, they have not earned that amount by law and are therefore denied that amount. To me, this is cheating! In such cases, either the employer should pay the due amount or not include it in CTC!!! The same argument holds for loans—whether for a car, furniture, or homes. Normally, a pro-rata amount is included in CTC and does not get paid if the employee does not avail such facilities! This also would amount to cheating!
On these yardsticks, you decide whether LTA should be included in CTC or not because, after all, it has to be a management decision. I would not include it in CTC as while this is a manpower cost, one has to EARN it, and to that extent, it becomes a conditional payment. But you have to decide for yourself.
Is your query answered? If not, elaborate!
Regards,
Samvedan
March 26, 2011