Understanding C-2-C Salary: Does It Really Help Reduce Employee Turnover?

Respected All Readers,

In recent years, corporations have been implementing the C-2-C (Cost to Company) concept to determine the salaries of both newly recruited and existing employees. The components of Cost to Company are as follows:

1. Basic Salary (25% of C-2-C, with a minimum of 6526/- per month for employees with a C-2-C of 7000/- per month. For employees earning less than 7000/- per month, it is 4350/- (the minimum wage prescribed by law for skilled individuals).

2. Special Pay (Difference between C-2-C and total expenditure on all accounts).

3. House Rent Allowance at 50% of Basic Salary.

4. Statutory Bonus at 11% of Basic Salary.

5. Company's Contribution towards ESIC at 4.75% of total emoluments less PF Contribution.

6. Company's Contribution towards PF at 12% of Basic Salary.

7. Encashment of Earned Leave at 1 day for every 20 days worked.

8. Gratuity at Basic Annual Salary divided by 26 multiplied by 15 days.

I kindly request all readers to provide their valuable input on the validity and final outcome of this approach in the context of long-term HR relationships with employees and in terms of reducing attrition.

Regards,
Jawaharlal Moondra

Whatever restructuring your organization is doing cannot be made applicable to old employees without giving notice for change under the ID Act, especially when they are put in a disadvantageous position. Higher basic pay cannot be reduced to a lower percentage of CTC as shown above. Also, all those allowances cannot be reduced wherever they are linked to their basic percentages. This will adversely affect old employees regarding their gratuity and leave encashments as well. All employees covered under 'Workmen' under the ID Act are to be given notice for change, and written acceptance needs to be obtained before implementation.

Thanks,
Manish S. Joshi