How Do I Transition Employee Pay from Gross to CTC? Seeking Guidance on the Process

Sub: Remuneration Query

My company has decided to change the remuneration terms from Gross to CTC. I would like to know the accurate process to proceed with this change. It would be very helpful if I could receive the proper format of the 'amended remuneration terms' to have them acknowledged by existing employees.

Seeking your guidance.

Thanks,
Ankita Bhavsar

Understanding CTC (Cost to the Company)

CTC means "Cost to the Company." Any benefit which you can cost and assign a figure to becomes a component of the CTC. Attached is an Excel sheet that captures most of the components of a CTC. In your company, the salary and benefits components may vary; hence, you can add those as well and arrive at the CTC for an employee. If you want to give an employee a CTC of Rs. 10.00k, then just change the figures in column G23. You will get the CTC breakup for per month (p.m.) and per annum (p.a.).

Regards,
Bobby

Dear Bobby & Vaibhav, Thanks for sharing the details and trying to solve my query. However, my actual concern is different. I am well aware of all the calculations related to CTC. The big challenge is convincing existing employees about the CTC structure and voiding the previous dues of employer liabilities, such as Bonus, ESIC Contribution, Gratuity, etc.

Now, I am looking for the right procedure to follow, which includes the final content with history and mystery, along with half-yearly increments. I have drafted the following, but I am not satisfied with it. Please suggest the right procedure.

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Date:

Sub: Revised CTC Remuneration

Dear [Name],

The management takes great pride in reappointing you as 'Designation' in Concept Infoway Pvt. Ltd. w.e.f. [DOJ].

As mutually agreed, your monthly revised cost to company remuneration is Rs. [Amount]/-, inclusive of other allowances and subject to deduction of any statutory or other deductions.

It will be increased on the below-mentioned date and time, based upon your all-round performance during the tenure. However, in case of poor performance, the increment can be withheld at the sole discretion of the Management. Increments are neither automatic nor a right.

Effective Date & Month
Monthly Revised CTC Remuneration Amount

[Amount]

[Amount]

[Amount]

The bifurcation of your salary into various heads is at the sole discretion of the Management. The Management is further empowered to restructure your cost to company remuneration at any time in the future at its sole discretion.

We are delighted to have you in the company. Please indicate your understanding and acceptance of the above terms and conditions by signing and returning the duplicate copy of this letter.

Thanking you,

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Thanks,

Ankita

CTC is the total investment by the company in the employee. As the Excel sheet (given by Bobby) shows, CTC = Gross (Basic + DA + HRA + Special Allowance) + Company's contributions to PF, ESI, etc. + Gratuity (around 5% of the Basic) + periodic allowances (like LTA, Medical, furniture allowances) + other perks (like car, house, etc.) translated to money. You may affix an Annexure to your letter stating all the components of the CTC, monthly, and yearly.

Regards,
Rajusiachen

The term CTC is ambiguous. The framework differs from one company to another. In the name of CTC, some companies include mobile phone reimbursement, conveyance allowances given for outdoor duties, etc. No standard is being followed across various sectors. You can formulate your policy of including the heads under CTC, which may essentially be spent on employees other than company-related expenses or reimbursements.

Regards,

CTC is the total breakdown of the employee's monthly salary. The best way to understand in your case is CTC = Gross + employer's (PF, ESIC, insurance premium, clothing, or washing expenses, etc.), and when you subtract the employee's PF, ESIC, insurance premium, etc., you will get the net take-home of the employee. For details, please refer to the attachment.

Regards,
Sugeet

From all the views expressed above, I have some different perspectives on your problem. First of all, I do not understand why this problem is being discussed in this manner. Ankita, it is very difficult to change the remuneration into CTC without affecting the status of ESI/PF/Bonus/Gratuity or any other type of benefits that are already available. It is essential to know the type of industry you are working in, the status of agreements/union activities, or any other relevant background information to ensure how to protect your employer without facing any legal liability. This requires private, personal, and practical discussions. I believe that a solution can be found through these discussions. Whether you agree or not, my opinion is very clear. It is important to consider all these factors before moving forward.

Thank you, and have a good day.

Regards,
P.L. Chhipa