Dear Seniors!
I've got a query here. I highly appreciate your kind clarification. Is it appropriate/justified to deduct the employer's EPF contribution from the employee's CTC during salary calculation?
Best Regards
From India, Hyderabad
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10I've got a query here. I highly appreciate your kind clarification. Is it appropriate/justified to deduct the employer's EPF contribution from the employee's CTC during salary calculation?
Best Regards
From India, Hyderabad
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Dear,
What does CTC mean? It is the cost to the company by hiring you. So, it has to be deducted from CTC only. Because you have negotiated CTC, you negotiate on gross or net, it will not be deducted.
Thanks,
JS Malik
From India, Delhi
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What does CTC mean? It is the cost to the company by hiring you. So, it has to be deducted from CTC only. Because you have negotiated CTC, you negotiate on gross or net, it will not be deducted.
Thanks,
JS Malik
From India, Delhi
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Hello,
It is neither appropriate nor justified to deduct the employer's contribution to PF from the employee's wage.
Section 12 of the EPF and Miscellaneous Provisions Act, 1952 mandates that the employer shall not reduce wages, etc. Additionally, Clause 31 of the Employees' Provident Fund Scheme mandates that the employer's share should not be deducted from the members.
I suspect slight confusion in your query.
CTC, or "Cost to Company," is an internal budgeting tool for management to check and control total Employee Related Costs to the organization. CTC includes the wage and, in addition, the conditional and indirect payments that an employee may be entitled to as a consequence of their employment. Professionally, I have no objection to the use of the CTC concept but only when it is used for budgetary control.
I consider it entirely wrong to negotiate salaries based on CTC because when conditional payments (like bonuses, incentives, housing loans, and/or interest subsidies, etc.) do not come through (for no fault of the employee), the organization may end up with a disgruntled employee, losing credibility.
Therefore, while the employer's share of PF contribution can be a part of CTC, it should not be used to inflate the figure to attract potential candidates. If an organization does that, it will likely regret it sooner rather than later!
I hope the issue is clear now!
Regards,
Samvedan
March 13, 2009
From India, Pune
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It is neither appropriate nor justified to deduct the employer's contribution to PF from the employee's wage.
Section 12 of the EPF and Miscellaneous Provisions Act, 1952 mandates that the employer shall not reduce wages, etc. Additionally, Clause 31 of the Employees' Provident Fund Scheme mandates that the employer's share should not be deducted from the members.
I suspect slight confusion in your query.
CTC, or "Cost to Company," is an internal budgeting tool for management to check and control total Employee Related Costs to the organization. CTC includes the wage and, in addition, the conditional and indirect payments that an employee may be entitled to as a consequence of their employment. Professionally, I have no objection to the use of the CTC concept but only when it is used for budgetary control.
I consider it entirely wrong to negotiate salaries based on CTC because when conditional payments (like bonuses, incentives, housing loans, and/or interest subsidies, etc.) do not come through (for no fault of the employee), the organization may end up with a disgruntled employee, losing credibility.
Therefore, while the employer's share of PF contribution can be a part of CTC, it should not be used to inflate the figure to attract potential candidates. If an organization does that, it will likely regret it sooner rather than later!
I hope the issue is clear now!
Regards,
Samvedan
March 13, 2009
From India, Pune
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It depends on how you negotiate CTC. Companies are adding the employer's share of PF in the CTC, and it is clearly communicated to the hiring employee that their CTC includes the employer's share of PF.
From India, Delhi
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From India, Delhi
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Dear Mr. Samvedan,
You are very right in your approach, but what I feel is that is one side of the picture. Maybe a fresher gets a partial understanding of CTC and can be lured with the attractive figure. However, this is not true in every case. A person negotiating on the salary part should have a clear idea of his cash in hand from HR, and we HR professionals are responsible for making the candidate aware of that. Only when the person feels satisfied with what he is getting, will he join the organization. The responsibility lies with HR to ensure the candidate is aware of the real picture.
Moreover, CTC actually provides a true picture to the candidate of how much he would be getting and how much cost the company is bearing while hiring him. Therefore, it all depends on people's perception.
Regards,
Suman
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You are very right in your approach, but what I feel is that is one side of the picture. Maybe a fresher gets a partial understanding of CTC and can be lured with the attractive figure. However, this is not true in every case. A person negotiating on the salary part should have a clear idea of his cash in hand from HR, and we HR professionals are responsible for making the candidate aware of that. Only when the person feels satisfied with what he is getting, will he join the organization. The responsibility lies with HR to ensure the candidate is aware of the real picture.
Moreover, CTC actually provides a true picture to the candidate of how much he would be getting and how much cost the company is bearing while hiring him. Therefore, it all depends on people's perception.
Regards,
Suman
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Dear All,
At the time of salary fixation/negotiation or after employee joining, kindly inform the employee that PF is a part of CTC. Also, briefly explain the difference between the CTC and how the monthly salary is calculated. PF is an employer contribution shown in CTC. For salary purposes, we will consider up to the gross components.
Regards,
Venkatesh
From India, Madras
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At the time of salary fixation/negotiation or after employee joining, kindly inform the employee that PF is a part of CTC. Also, briefly explain the difference between the CTC and how the monthly salary is calculated. PF is an employer contribution shown in CTC. For salary purposes, we will consider up to the gross components.
Regards,
Venkatesh
From India, Madras
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Hello Suman and everyone!
I am sorry if I sounded like generalizing my observation. That was not the intention.
I have no issues at all if a candidate is adequately explained the difference between CTC and salary that would be paid to him monthly. At times, I have seen the difference between the two to the extent of a few thousand on a monthly basis. This may also be an organization-specific matter.
We must presume that the candidate may be naive about the two terms and realities. Speaking for the organizations, I feel we are obliged to ensure that we are not misunderstood on this vital issue particularly! That primarily was the drift of my argument.
I hope I have clarified my stance!
Regards,
Samvedan
March 13, 2009
From India, Pune
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I am sorry if I sounded like generalizing my observation. That was not the intention.
I have no issues at all if a candidate is adequately explained the difference between CTC and salary that would be paid to him monthly. At times, I have seen the difference between the two to the extent of a few thousand on a monthly basis. This may also be an organization-specific matter.
We must presume that the candidate may be naive about the two terms and realities. Speaking for the organizations, I feel we are obliged to ensure that we are not misunderstood on this vital issue particularly! That primarily was the drift of my argument.
I hope I have clarified my stance!
Regards,
Samvedan
March 13, 2009
From India, Pune
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Dear Mr. Samvedan and friends,
Please note that nowadays, 99% of candidates are asking for details, including the take-home salary. We issue offer letters with a breakdown of the CTC, and the candidate acknowledges the same. Therefore, there should be no issues under any circumstances. However, if things are not clearly explained and agreed upon, not only the PF contribution but everything can become problematic. Nowadays, all companies are following this procedure as we need to finalize the budget at the beginning of the financial year. Hence, it is better to stick to a CTC mode only. In this context, I agree with Mr. Suman.
Thanks and regards,
Kameswarao
From India, Hyderabad
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Please note that nowadays, 99% of candidates are asking for details, including the take-home salary. We issue offer letters with a breakdown of the CTC, and the candidate acknowledges the same. Therefore, there should be no issues under any circumstances. However, if things are not clearly explained and agreed upon, not only the PF contribution but everything can become problematic. Nowadays, all companies are following this procedure as we need to finalize the budget at the beginning of the financial year. Hence, it is better to stick to a CTC mode only. In this context, I agree with Mr. Suman.
Thanks and regards,
Kameswarao
From India, Hyderabad
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Dear Mr. Samvedan and friends,
In HR, we are often blamed for the discrepancy between the salary presented during negotiations and the actual amount received at the end of the month. Nowadays, every employee inquires about the CTC during negotiations, and many organizations follow this practice. There is nothing wrong with transparently showing an employee the total compensation offered by the organization. It is crucial for every employee to have a clear understanding from HR about the net salary they will receive.
I will provide an example to illustrate how employees react and then place blame on HR. Recently, we hired a Safety Manager for our plant located in a remote area. The company provided free accommodation, and during the offer process, we clearly stated in writing that a 10% deduction would be made for the accommodation as a perk. However, when the employee saw the salary slip with the 10% deduction, he raised an issue claiming that he was not informed about this deduction beforehand.
This scenario exemplifies how HR is often unfairly criticized. It is essential for HR to ensure clarity regarding an employee's CTC and not paint an overly optimistic picture during the recruitment process.
Abhijeet Sawant
From India, Ahmadabad
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In HR, we are often blamed for the discrepancy between the salary presented during negotiations and the actual amount received at the end of the month. Nowadays, every employee inquires about the CTC during negotiations, and many organizations follow this practice. There is nothing wrong with transparently showing an employee the total compensation offered by the organization. It is crucial for every employee to have a clear understanding from HR about the net salary they will receive.
I will provide an example to illustrate how employees react and then place blame on HR. Recently, we hired a Safety Manager for our plant located in a remote area. The company provided free accommodation, and during the offer process, we clearly stated in writing that a 10% deduction would be made for the accommodation as a perk. However, when the employee saw the salary slip with the 10% deduction, he raised an issue claiming that he was not informed about this deduction beforehand.
This scenario exemplifies how HR is often unfairly criticized. It is essential for HR to ensure clarity regarding an employee's CTC and not paint an overly optimistic picture during the recruitment process.
Abhijeet Sawant
From India, Ahmadabad
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Dear Saleem,
CTC is inclusive of EPF, so it has to be deducted from the salary. Basically, most of the people don't want to understand what is meant by CTC because they are desperate for a change from their present employment due to the monotonous and fatiguing nature of jobs, or their desire to elevate from one level to another with respect to the next job position. This costs them 10% to 20% less pay than their expectations.
Badlu
From Saudi Arabia
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CTC is inclusive of EPF, so it has to be deducted from the salary. Basically, most of the people don't want to understand what is meant by CTC because they are desperate for a change from their present employment due to the monotonous and fatiguing nature of jobs, or their desire to elevate from one level to another with respect to the next job position. This costs them 10% to 20% less pay than their expectations.
Badlu
From Saudi Arabia
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