Dear HR Managers,
Good morning! I am working as an HR Manager at a reputed hospital in Central Delhi. My management wants me to redefine the company's costs to the employees by adding various factors like gratuity, leave encashment, etc. Gratuity is applicable to an employee only after the completion of 5 years of continuous service. I am a little confused about how to calculate the same for new employees.
I am waiting for your valuable feedback on the subject.
Thank you.
Regards,
Sreehariprasad N.
Manager HR DHLI
From India, New+Delhi
Acknowledge(0)
Amend(0)
2Good morning! I am working as an HR Manager at a reputed hospital in Central Delhi. My management wants me to redefine the company's costs to the employees by adding various factors like gratuity, leave encashment, etc. Gratuity is applicable to an employee only after the completion of 5 years of continuous service. I am a little confused about how to calculate the same for new employees.
I am waiting for your valuable feedback on the subject.
Thank you.
Regards,
Sreehariprasad N.
Manager HR DHLI
From India, New+Delhi
Acknowledge(0)Amend(0)
Had you searched CiteHr, you would have found some discussions at https://www.citehr.com/48148-calcula...mpany-ctc.html. It all depends upon your company policy, as someone said.
Have a nice day.
Regards,
Simhan
A retired academic in the UK
From United Kingdom
Acknowledge(0)Amend(0)
Have a nice day.
Regards,
Simhan
A retired academic in the UK
From United Kingdom
Acknowledge(0)Amend(0)
Components of CTC
CTC is normally a combination of three main heads:
- **Fixed Annual CTC:** Generally consists of Basic, HRA, Special Allowance, Medical Allowance, Conveyance Allowance, and various other allowances, Superannuation, LTA, etc.
- **Variable/Incentive/Performance Bonus**
- **Other Benefits/Perquisites:** Include Vehicle facility, Housing Facility, Gratuity, Mediclaim Insurance, Personal Accident Insurance, Mobile/Residential Telephone facility, etc.
Components a & b can be quantified easily. However, for Other Benefits like a vehicle, phone, housing, you can consider the actual amount paid by the company, premium paid individually for insurance, gratuity can be quantified as (15 days basic/26) * 30 for a year. Although the same is not being paid by the organization, the company is paying to the trust to make a provision for the same. Similarly, for Leave encashment, you can obtain provisional figures from your Finance & Accounts department as booked by them in their books of accounts.
Hope this information will help you.
Regards
From India, Mumbai
Acknowledge(0)Amend(0)
CTC is normally a combination of three main heads:
- **Fixed Annual CTC:** Generally consists of Basic, HRA, Special Allowance, Medical Allowance, Conveyance Allowance, and various other allowances, Superannuation, LTA, etc.
- **Variable/Incentive/Performance Bonus**
- **Other Benefits/Perquisites:** Include Vehicle facility, Housing Facility, Gratuity, Mediclaim Insurance, Personal Accident Insurance, Mobile/Residential Telephone facility, etc.
Components a & b can be quantified easily. However, for Other Benefits like a vehicle, phone, housing, you can consider the actual amount paid by the company, premium paid individually for insurance, gratuity can be quantified as (15 days basic/26) * 30 for a year. Although the same is not being paid by the organization, the company is paying to the trust to make a provision for the same. Similarly, for Leave encashment, you can obtain provisional figures from your Finance & Accounts department as booked by them in their books of accounts.
Hope this information will help you.
Regards
From India, Mumbai
Acknowledge(0)Amend(0)
Dear Sreehariprasad,
Regarding your query:
Provision of Gratuity in Accounts
Normally, the provision of gratuity is booked in the books of accounts because it is a liability for the company. The calculation of gratuity in CTC on a monthly basis is that 4.81% of the basic salary will go to gratuity accumulation.
Encashment of Leave Policy
As for the encashment of leave, establish a policy that specifies the maximum number of days that can be encashed in a year, regardless of the accumulated leave. This restriction will aid in determining the amount to be reserved for encashment. Alternatively, if you need to calculate the entire leave encashment, compute each employee's outstanding encashable leave and compile them for provision in the books of accounts.
I hope this is clear. Wishing you all the best in your HR career.
Regards,
S. Sethupathy
Excellent HR Services
Erode.
From India, Selam
Acknowledge(0)Amend(0)
Regarding your query:
Provision of Gratuity in Accounts
Normally, the provision of gratuity is booked in the books of accounts because it is a liability for the company. The calculation of gratuity in CTC on a monthly basis is that 4.81% of the basic salary will go to gratuity accumulation.
Encashment of Leave Policy
As for the encashment of leave, establish a policy that specifies the maximum number of days that can be encashed in a year, regardless of the accumulated leave. This restriction will aid in determining the amount to be reserved for encashment. Alternatively, if you need to calculate the entire leave encashment, compute each employee's outstanding encashable leave and compile them for provision in the books of accounts.
I hope this is clear. Wishing you all the best in your HR career.
Regards,
S. Sethupathy
Excellent HR Services
Erode.
From India, Selam
Acknowledge(0)Amend(0)
User Input:
You have the following three options to consider the cost of gratuity in CTC. Discuss these options with your management and come to a conclusion.
1. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, only in the case of those employees who have completed 5 years of service.
2. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, in the case of all employees irrespective of their length of service. This is more realistic since gratuity is payable even before the completion of 5 years of service, in case of the death of an employee.
3. In case you have taken a Group Gratuity Scheme Policy from LIC or any other insurance company, then add the policy premium paid by you to CTC by proportionately allocating it to individual employees.
From India, Pune
Acknowledge(0)Amend(0)
You have the following three options to consider the cost of gratuity in CTC. Discuss these options with your management and come to a conclusion.
1. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, only in the case of those employees who have completed 5 years of service.
2. Add 4.8% of Basic Salary + DA as a monthly cost of Gratuity, in the case of all employees irrespective of their length of service. This is more realistic since gratuity is payable even before the completion of 5 years of service, in case of the death of an employee.
3. In case you have taken a Group Gratuity Scheme Policy from LIC or any other insurance company, then add the policy premium paid by you to CTC by proportionately allocating it to individual employees.
From India, Pune
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Employee Benefits.doc