How Can We Increase Margins by Adding Deductions Like LTA in CTC? Seeking Advice!

Can we add LTA in CTC as a deduction?

As we are a C to H IT company, our margins are very low, and to increase margins, clients are requesting more deductions to be shown in the CTC. Can someone suggest what deductions we can include in the CTC?

Understanding LTA in CTC

How is LTA a deduction? Rather, it is an addition to the salary offered. I think you have no basic idea about salary, remuneration, or compensation. If the objective is CTC, how can the clients insist on showing more deductions in CTC?

Impact of Misleading CTC on Employees

If your ideology is to show as many allowances as possible in the compensation as Cost To Company, you should be betraying your employees. If an employee accepts the offer believing that the allowances shown in the CTC are amounts due to him, and later on you say that these are payable based on some conditions, he will get frustrated. That frustration will be reflected in his deliverables. Ultimately, he will resign and go. This will only add cost to the company.

Importance of Transparency in Remuneration

At the same time, if you offer a remuneration that will be actually paid in real terms, there will be transparency, and that will make the employees confident. Obviously, the latter group of employees will be far better than the former. Therefore, ask the clients what they expect from CTC?

You can add LTA in CTC as a component, but you can't do the deduction. You may be XYZ Co, but it doesn't matter much to the laws because you can't engage in unethical practices. You can increase your profit margins by reducing overhead expenses and other nonproductive expenditures.

Leave Travel Allowance (LTA)

LTA is a benefit for employees, payable in cash or as reimbursement if the scheme permits (as in the case of government and quasi-government establishments). Firstly, employees avail themselves by spending and then claim reimbursement, once in a block of year(s), for self and family. There are no deductions like EPF involved in this.

Enhancing Profit and Profitability

In enhancing profit and profitability, there can be many factors that corporate management must seriously consider. I don't think there is room for your clients to insist on any aspect in this regard. Perhaps, during casual or personal discussions, they may have suggested some ideas that need to be considered in the right perspective.