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chavi save
can someone tell me,is CTC benifitial or no?
From India, Pune
Anupama Saini
5

Your question is nnot very clear ...in what perpespective are you asking this question.Please reframe your question for better replies.. Rgds Anu
From India, Calcutta
Sumana1
8

Hi All,
I'm new to the forum.
I'm working as a HR Executive in IT firm.
The appraisal activity in my organisation has started which makes me to be clear on the semi-appraisal method.
My thinking is if appraisals are taking place once in 6 months i.e, semi-annually, then why the CTC to be termed as CTC PA in the revised CTC as it is sure that particular amount of CTC will be for the next 6 months & thereafter in the next appraisal another figure of CTC will come into picture. Though I'm aware that the appraisals need not end up in salary hike only as there could be no changes depending on case-to-case basis.
Can any one tell me the logic behind it.

From India, Bangalore
Anupama Saini
5

Cost to the company is not relaetd to annually or bi-annualy ..it is basically what is the cost to the companyof a particular employee .As you said that there may other perks or incentives which are directly or not directly related to salary, therefore cost ot the company gives out a bird's ey view on howmuch a company is investing on one employee.CTC also helps in budgeting.It depends upon the company on how to present an employees salary.gross salary only or CTC based. The CTC annual can be divided by 12 and one months;s cost to the compnay can be derived.
I hope i have cleared your doubt
Anu :D

From India, Calcutta
sivaipm
2

It is beneficial to the company. Can show the employee how much the copmpany is spending for him
On the other hand, the actual cash one receives from the employer is important and some times it may be 50% or even less than CTC.
Hope you got it clear now.

From India, Mumbai
Sumana1
8

Hi All,
Thank U Anu & Siva for the reply.
By both your reply I can understand that the employer will be benefitted by the term CTC per annum for budgeting.
But my query is in IT Industry, periodic appraisals take place as it could be quarterly or semi-annually. In my Organisation it is semi-annual and while mentioning the CTC it will be mentioned as CTC PA including the deductions & other. But what exactly I want to know is why cannot I mention it as CTC for 6 months as the next appraisal takes place after 6 months. On the other side I'm aware that appraisals never target only in pay raise as it purely depends on performance. Sometimes there could be no raise in pay in case of poor performance So, in such a case CTC per annum mentioned will work out.

From India, Bangalore
santosh verma
4

The benefits of switching to cost to company remuneration structure

Johannesburg, 25 November 2004: The migration from standard remuneration structures to cost to company packages does not only afford the employee tax efficiencies, but has the added benefit of awarding the employee the flexibility to tailor non-cash benefits according to individual requirements.

Ernst & Young partner for Outsourcing Solutions Jaco van der Walt points out that a growing number of companies are switching from standard remuneration packages to cost to company structures in a bid to attract and retain staff of the highest calibre.

The cost to company remuneration structure is a remuneration method that is inclusive of all the benefits enjoyed by the employee in the course of his employment.

In other words, the cost to company structure details the costs that are incurred by the employer in filling a particular position.

Van der Walt, however, notes that employees are generally oblivious of the value of the benefits that come with their employment.

“Cost to company structuring creates a greater employee awareness of the value of their benefits, taking the pressure off salary increases and in turn making it easier to retain staff,” van der Walt explains.

When an employer offers these benefits to the employee, the costs for the organisation tend to be less expensive because of bulk discounts and reduced administration costs.

He adds: “It has been proven through many surveys that employees are often not aware of the cost of their benefits and that should they, on an individual basis, purchase these benefits the costs would be much higher.”

Referring to tax benefits an employee might accrue, van der Walt says recent policy changes have pointed to stricter handling of fringe benefits and the total cost to company is seen as one way of regulating procedures from a tax compliance point of view.

He cautions though, that the employer should follow the conversion process to the letter for the employee to maximise tax efficiencies.

Because the move from standard to cost to company structure constitutes a material change to terms and conditions of service, van der Walt says the onus is vested on the employer to inform and engage the employee on true intention of altering these conditions.

In addition to communicating the necessary changes to the affected employee, van der Walt say all necessary documentation has to be aligned with the new package design to avert a SARS attack.

“An employer cannot, therefore, unilaterally change the terms and conditions of employment without prior consultation with the affected employee.

“A critical factor in a successful salary structure is that such new structure is entered into by mutual consent between employer and employee,” he says.

To maximise tax efficiencies, van der Walt says employers would normally divest the employee of his/her liability to pay any part of the member’s contribution to the provident fund or medical scheme and to shift the liability for the total amount of the employee’s provident or medical aid contribution to the employer.

“Where a true salary sacrifice has taken place, an employees’ salary is reduced by the amount of the salary sacrifice and all benefits calculated based on the salary are similarly reduced,” he says.

As tempting though as a move to cost to company remuneration package can be, van der Walt says the system is equally fraught with pitfalls.

A reduced salary bought about by the shift, implies that contributions to the retirement are reduced.

In addition to bouncing off risk to an employee, the cost to company structure further reduces the statutory contributions to the UIF because of a reduced salary.

He cautions though that the total cost to company remuneration is not a remedy on its own, but is just one factor that should be addressed to ensure an employer would withstand a tax compliance audit from tax authorities.

Regards,

Santosh Verma.

From India, Bangalore
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