Can I Legally Include Employer PF in CTC? Seeking Advice on Salary Breakdown

Dear Seniors, Can I show the Employer PF contribution as part of CTC (as shown below)? I need your expert opinion.

Components:
- Basic Pay + DA
- House Rent Allowance
- Medical Allowance
- Conveyance
- Special Allowance
- Bonus
- Employer PF
- Total (A)

Deductions:
- Professional Tax
- Provident Fund (Employee & Employer Contribution)
- Total Deduction (B)

Net Take Home before TDS:

Is the above bifurcation legal? Kindly advise.

Regards, Glenn

You can also include employer PF into CTC. However, when deducting, you must only deduct the employee's part of the contribution. This means the employer's PF should be added, and the employee's PF has to be deducted. Do not deduct both.

Regards,
Suresh

You mean to say in deduction only employee PF has to be mentioned. We at our organization deduct 1665 in total for PF (780 + 885), so in the payslip, we will have to mention only 780/- and not 1665/-. Kindly advise.

Regards,
Glenn

Dear Seniors,

I have attached the payslip that we provide to our employees for a salary of Rs. 28,000/- CTC per month. We deduct PF of Rs. 1,665/- (both employer 885 & employee 780 contribution) and PT of Rs. 200. Therefore, the total deduction we make is Rs. 1,865/-, and the net amount paid to the employee is Rs. 26,135/- (direct debit in the bank).

Clarification on Payslip and Bank Payment

I would like to know if including employer PF in earnings and deducting employee PF of Rs. 780 from his salary, the total deduction will be 780 + 200 = 980 (28,000 - 980 = 27,020). So, the amount shown in the payslip will be 27,020, but the actual amount deposited in the bank will be Rs. 26,135 (27,020 - 885).

How can we communicate to the employee that the employer contribution is also deducted, explaining the difference between the payslip amount and the actual payment in the bank?

I would appreciate any suggestions or help that I can get on this.

Regards,
Glenn

You have to show the Gross Salary as Earnings, and Deductions will be of the employee only. So the Employer's contribution towards PF will not be shown in Earnings and Deductions of the payslip. Hope this resolves your query.

Understanding CTC Components

You can show the employer's contribution in the CTC. In CTC, there are three parts:

1. Monthly Earnings
2. Deductions
3. Annual Benefits

CTC = Monthly earnings x 12 + Total Annual Benefits. You can show the Company PF contribution in the Annual Benefits block.

Regards,
A.P. Kumar

It should be something like this. Gross shows all the fixed earnings, and deductions are only of the employee's. CTC is the total of gross and employer's deduction. This is because CTC is the total that a company contributes for an employee. Employee's deduction is from the gross, which is for their benefit, and employer's contribution is over and above gross.

Annual CTC
246,000.00

Breakdown of Salary Components

- Basic (40% of gross): 7,776.64
- HRA (40% of basic): 3,110.66
- Conveyance Allowance: 800.00
- Medical Reimbursement: 1,250.00
- Special Allowance: 6,504.30
- Gross Salary: 19,441.60

Less Deductions

- PT: 200.00
- PF (12% from basic): 933.20
- ESI (1.75% from gross, if gross < 15,000): 0.00
- TDS:

Net Salary (take-home)
18,308.40

Employer's Contribution

- PF (12% from basic): 933.20
- PF Admin charges (1.61% on basic): 125.20
- ESI (4.75% from gross, if gross < 15,000): 0.00

Total Monthly CTC
20,500.00

Regards.

You can show it, but it's unfair to include statutory payments of the employer like PF and gratuity in the CTC when we are not doing so.

Dear Dhrao,

Can you please explain why you feel this is unfair? In fact, I have made a number of postings on CTC and am now fed up with this.

Regards,

In many organizations, both in the public sector and government, statutory payments are included in the cost to company (CTC). This practice is often seen as a way to enhance the CTC offered to employees and demonstrate that the organization is a competitive payer. If organizations choose to include statutory employer liabilities in the CTC during negotiations, then why should they not also consider including costs such as electricity, water, and workplace amenities in the CTC? After all, these expenses also contribute to the overall cost to the company because of the candidate.

Thank you.