DEMYSTIFYING CTC Contributed by S.Srinivasan
HERE ARE LIES, DAMNED LIES AND CTC’S
NUBE circular 03 / 2013 dated : 11-06-2013 rightly explained what is Cost to the Company, net salary and gross salary which are some of the key components that form part of any individual’s salary structure.a transparent effort by a negotiating union Cost to the company is the figure what companies generally like or prefer to quote when they offer salary packages to potential job aspirants. The cost to the company figures can be quite misleading for new job aspirants while seasoned or experienced individuals usually are quite obviously aware of the differences after a couple of bitter experiences. At the end of it, the amount the person actually gets in hand can turn out to be significantly lower than what he/she would have originally imagined.
Eg:1
Ravi, a fresh software graduate, joined a top notch IT Company. For his first job, he was extremely happy with the total CTC of Rs 6,00,000. On the basis of this CTC, Ravi made lavish plans with his first month’s salary. Expensive gifts for family, a swanky new bike and the latest mobile phone. But with the first salary, he realized some of his plans had to wait. His take home salary was nowhere close to his estimation of his salary. He approached his HR, who then explained the breakup of his CTC, which he had just glanced over at the time of joining.
The Cost to Company refers to the total expenditure a company would have to incur to employ you. It includes monetary and non-monetary benefits, such as monthly pay, training costs, accommodation, telephone, medical reimbursements or other expenses, borne by the company to keep you employed. The total CTC as need not be the actual salary in hand at the end of the month. It is simply a sum of various components put together.
Eg 2
Let’s take a live example to understand this better. Arjun Malhotra recently got selected as an Assistant Manager in one of the leading Mumbai-based BPOs. It was his first job and he was offered an annual CTC package of Rs. 501624/- ‘ Wow that sounds cool’ he thought. He immediately did some rough calculations and estimated that his monthly salary would turn out to be Rs. 41,802/-. His happiness didn’t last long when he was provided the offer letter and then it dawned on him what a cost to the company or CTC package meant.
Basically a CTC package includes all of the cost factors (well almost) that a company spends on an individual. This primarily includes Employer’s contribution of provident funds, Gratuity, Mediclaim Insurance, Food Coupons, Loyalty bonus, and performance linked bonuses to name a few. When companies include all these factors naturally the salary has to look bloated.
From an employee’s perspective the inclusion of the aforementioned factors doesn’t reflect directly in his net salary or his take home salary. Net salary or take home salary basically means what you get in hand post the standard deductions such as PF, gratuity, and professional tax if applicable, etc. The other major factor that impacts your net salary other than the standard deductions is the income tax.
Now that we have explained you what a CTC and net salary means, let us try and explain you the meaning of “gross salary.” Gross salary is basically the salary that is quoted on your pay slip. Gross salary doesn’t include the additional components that form part of your CTC.
Now lets go back to Arjun’s example. Below is an extract from Arjun’s offer letter.
Gross and CTC Salary Breakup
Components
|
Amount Per Month
|
Components
|
Amount Per Month
|
Basic
|
13200
|
Employer's PF
|
1797
|
HRA
|
7260
|
Gratuity
|
635
|
Transportation
|
800
|
Fixed Bonus
|
5500
|
Education
|
200
|
Mediclaim
|
250
|
Meal Coupons
|
1100
|
Canteen
|
620
|
LTA
|
990
| ||
Medical
|
1250
| ||
CCA
|
8200
| ||
Total Gross
|
33000
|
Total CTC
|
41802
|
Annual CTC
|
5010624
|
Showing 1 to 10 of 10 entries
The above table has been divided into two segments. The components on the left are the ones that are accounted for in his gross salary while the components on the right are the CTC components which don’t directly reflect in his take home pay. Most of these components such as performance bonus, gratuity, employer’s contribution of PF and canteen facilities do not get accounted for in his monthly take home but benefits he can derive in the long run. So if we all want to know what Arjun’s actual salary is – well it turns out to be just Rs. 33,000/- (Gross salary) which is approximately Rs. 8000/- less than his CTC. Once again there are also some additional components included in Arjun’s gross salary such as LTA that would be paid out to him at the end of the year or the food coupons (Sodhexo meal passes) paid monthly but in the form of coupons. This again differs or varies from company to company. Most companies offer Sodhexo’s as a tax saving gesture where the employees get to save a certain amount annually on income tax as the deducted amount is not taken into consideration for calculating income tax.
Other than what you get to see in Arjun’s offer letter, different companies have a variety of components that are considered under CTC. For instance most leading banks provide home loans to their employees on a heavily discounted rate of interest. The entire benefit the employees gain from the discounted rate is added to their CTC package which hugely inflates their overall package.
Eg:3
Himadri Shekhar Bhattacharjee, a bank officer in his thought provoking, informative study in his site ‘musing of life has adumbrated this spurious , perverse concept succinctly that it could be inflated by as much as 73%, if not more. See, how it can inflate the pay package of bank employees, irrespective of the actual money at hand, as can be seen below:
CTC of a JMG- 1
Bank Officer : CTC of a bank officer
- INFLATION OF SALARY PACKAGE BY APPLYING CTC CONCEPT OF CALCULATION.BASIC PAYRs14500 pm*12174000.DEARNESS ALLOWANCE@36.75%, as on Aprill 2010Rs5328.75 pm*1263945.HOUSE RENT ALLOWANCE@6.5% AT OTHER PLACESRs942.50 pm*1211310.SPECIAL AREA ALLOWANCE@Rs400Rs400 pm*124800.CITY COMPENSATORY ALLOWANCE,@4% OF BP MAX. Rs540 pm.Rs540 pm*126480.PF CONTRIBUTION BY EMPLOYER @10% of BP(though There shall be no Provident Fund to officers joining the services of Banks on or after 01.04.2010. They shall be covered by a Defined Contributory Pension Scheme).Rs1450 pm*121450.RENT FREE ACCOMODATION (minus recover @1.20% of starting BP, ie.Rs174 pm17400.Furniture Facility(less, recovery @.25% of starting BP ie Rs36.25 pm from Rs80000, as admissible in PNB,for example).For an assumed asset life of 10 years,(80000-(36.25*120))75650.FIXED PERSONAL PAY at minimum.Rs858 pm*1210296.PROFESSIONAL QUALIFICATION PAY FOR CAIIB@ Rs410 pm, 2 years after reaching top of the scale.Rs410 pm*124920.PROFESSIONAL QUALIFICATION PAY FOR CAIIB@ Rs1030 pm. 2 years after reaching top of the scale.Rs1030 pm*121030.HALTING ALLOWANCE, w.e.f. 01.05.2010
Grade / Scales of Officers Major 'A' Class Cities (Rs.) Area I(Rs.) Other Places (Rs.)
Officers in Scale - IV & above 1000 800 700
Officers in Scale - I / II / III 800 700 60012360.MID ACADEMIC YEAR TR. ALL. w.e.f 01.05.2010 Rs.700/- p.m.700.MEDICAL AID (@Rs5100 pm,as prevalent in PNB, for ex.).5100.PETROLL REIMBURSEMENT@30 litres in a month in area III places.@Rs73 per litres for 12 months26280.NEWSPAPER EXPENSES REIMBURSEMENT(@ Rs150pm. at PNB, for ex.)@Rs150 for 12 months1800.MOBILE BILL REIMBURSEMENT(@Rs1200pm, at pnb, for ex)@Rs1200 pm for 12 months14400.ENTERTAINMENT EXPENSES(@Rs4800 pa, as paid by pnb, for ex.)4800.CANTEEN FACILITY(@Rs50 per employee, in mid sized branches, as paid by PNB, for ex.)@Rs50 for 12 months600.KEROSENE/FUEL CHARGES FOR CANTEEN (on actual basis).At an assumed consumption of one LPG cylinder pm for an office with 5 staff.1032.At an assumed staff strength of 5125.CLOSING ALL.FOR 2 CLOSINGS IN A YEAR@Rs250,per closing, as paid in PNB500.BRIEF CASE COST REIMBURSEMENT(@Rs150, as paid by PNB,for ex.).Not included as contingent upon it happening.150.CHILDREN'S SCHOLARSHIP SCHEME.4000.EX-GRATIA100000.SILVER JUBILEE/ MILE STONE AWARDS4000.MEMENTO TO RETIRING EMPLOYEES.5000.GRATUITY.Compensation on Transfer
Officers in Scale - IV & above` Rs.12,000/-
Officers in Scale - I, II & III Rs.9,000/-9000.LEAVE FARE CONCESSION, w.e.f 01.05.2010
An officer in JMG Scale - I is entitled to travel on duty by 1st Class or AC 2-Tier Sleeper by train. He may, however, travel by air (economy class) if so permitted by the Competent Authority having regard to the exigencies of business or public interest..DEPUTATION OUTSIDE BANK@7.75% of pay max.Rs2300 pm.DEPUTATION INSIDE BANK@4% of pay, max.Rs1200 pm.HILL AND FULE ALLOWANCE, w.e.f 01.11.2007
Places with an altitude of 1000 meters & above but less than 1500 metres & Mercara Town 2% of pay subject to a maximum of Rs.550/- p.m.Places with an altitude of 1500 meters & above but less than 3000 metres 2.50% of pay subject to a maximum of Rs.680/- p.m.Places with an altitude of 3000 meters & above 5% of pay subject to a maximum of Rs.1,570/- p.m.Not taken into calculation as not admissible to all..CTC Per Year438978.CTC Per Month,as on 01-04-201036,581.50.ACTUAL STARTING SALARY OF A JMG SC-I, AS ON 01-04-2010 PM21171.25.SALARY PACKAGE INFLATED BY CTC CONCEPT:73%15410.25.CTC FOR PERSONS MAY BE ADJUSTED FOR CC ALL AND NON CC ALL. RECEIPENTS.‘CTC’ emerged as a new and novel way to window dress salary packages to project them more than what one gets in his/her hand. Beware, the CTC concept is being toyed with, by FINMIN and IBA, to create a feeling that, bank employees are already getting more than what they deserve, so, there is no need for any further hike.But, it defies logic, why, government employees are kept untouched from this seemingly novel concept and pay commission structured pay and facilities are continued for them inspite of the stark disparity between pay of government employees and bank employees.Even State govt employees get more than what we get.Let the Finance Ministry lead from the front and show it to the Nation how the CTC structure be implemented by moving all the MPs, MLAs, Ministers, PM, President etc etc as well as the Govt Employees to the CTC Model first. Lets not forget Charity begins at home first. So please preach what you PracticeS.SrinivasanAbove all we have to increase our awareness and learning
Absolutely right and very nicely written. I shall forward this in fb and tweet too
ReplyDeletethankyou ramesh give vide publicity to your friends
ReplyDeletes.srinivasan
president
NUBE
CTC is a misleading concept to be applied in bank. They have actually devised a way to delay the wage negotiation process. In the present wage scenario bank employees are so poorly paid with enormous accountability and responsibility. Bank is the pivot of governmental economic process over and above a commercial heart but when wage determination for the bank employees comes up , they browbeat to accept such a quantum of salary which ranks much lower in the ladder of wage earners.Will the scenario change this time ?????????
ReplyDeleteClever Finance Minister and his sycophants Chairman and Managing Directors of banks (CMDs of public sector banks who are part of IBA )) are suggesting cost to Company concept for bank staff in line with what private companies in IT sector are using to tap talented person from Educational campus or to attract employees of other companies .
ReplyDeleteIt may be noted that promoters of private companies think for the betterment of their company and while picking up freshers from educational Institutes they keep in mind only the utility and gain to company from a particular person. They target to earn fifty lac from a person by offering a package of ten lac.
Most of IT companies hire an engineer or an MBA to outsource him or her for a foreign company and in such cases if the foreign company pays ten lacs of rupees to Indian IT company like Infosys or TCS, the employer offers a package of hardly two or three lac to the employment seekers.
On the contrary top officials of public sector companies think only for personal gain sacrificing all interests of the bank or company they represent. While picking up freshers from educational institutes top officers of a bank consider the personal benefits, monetary gain for their family, relation with person who recommend for selecting a particular youth for employment etc and they totally neglect the future of the bank they represent.
Even an inefficient officer from other bank in scale I is selected for scale III post by PS ban employer if his name is recommended by some imp person or some offer of bribe comes from some corner. Top officials of bank for gaining a lac or two in recruitment and promotional process can violate all ethics and moral recruit ineligibles and promote ineligibles.
Same position is in the case of promotion in public sector banks. Top officials seldom keep in view the utility of officer they select for promotion. Rather one who is number one flatterer of big bosses, who is of same caste and community , who is recommended by some VIP officer, who is corrupt and who has earned huge illegal money in credit sanction and shared with the bosses is picked up for promotion neglecting serious, efficient , honest and devoted officers.In the same fashion ED and CMD s are selected by MOF and the same culture flows from top to bottom in all promotion processes and in all cases of recruitment.
This is why private banks are progressing by leaps and bounds , their profit is increasing month by month , their NPA is lowest in banking sector, their CASA is highest, they employ greater number of youth , they create more employment , their customer service is better , their deposit and credit growth is higher , their NIM is more and everything is better compared to their counterpart in public sector under same domestic condition and same global situation. RBI gives all help and infuse capital from time to time , still PS banks are showing sickness and their health is moving from bad to worse whereas private banks are growing without any help from GOI .
ReplyDeleteCMD of every bank, RBI officials and MOF use to say all the time that banks are healthy and growing and from next quarter position is likely to improve. Politicians use to set committee after committee, suggest several ways for improvement, change rules from time to time and so on but never cares to ensure honest execution of rules and policies.
Top to bottom corrupt officers are in power and they leave no stone unturned to loot the bank from both hands for their personal gain and to help those who are ready to offer costly and costly gifts. Flattery and bribery is given full weight in all cases right from employment to promotion , credit sanction, write off bad loan , supply of goods and service and what not.
As such the concept of cost to company suggested by IBA and MOF is nothing but a tool to postpone wage settlement for indefinite period. It is pity that union leaders are also unable to understand the malicious intention of IBA members and the hidden agenda of MOF and UPA government.
If ‘cost to company’ concept is so much effective and productive, why the government does not apply to other public sector companies like ONGC, NTPC, SAIL , BSNL. Airlines, Government schools and Government colleges, Ministries, Central Services, state government services etc which are directly under control of the government and which are also supposed to produce more and more and which are also supposed to earn profits in addition to serving common men and serve social agenda of the country.
It is well known to all that all central services are governed by a set of scales and there is no stagnation and in most of the cases there is time bound promotion and at least there is value to seniority of staff. Scale of pay has got stagnation of increment as it happens in banks. An officer for the post of Secretary comes from senior IAS officers and not from educational campuses.
It is only in bank that an officer is directly recruited in higher scale .If cost of company concept is made a success in bank , there will be total chaos in banking and no power can stop further deterioration in health of banks.Bank staff who used to serve the bank for decades will have to leave the bank in a year or two if the concept of COST to COMPANY is accepted by Bank unions in Xth Bipartite Settlement.
Bank staff will be kicked out in few months if they do not flatter to their bosses and do not become ready to do even personal and family work of the top officials .It may be noted that in IT sector or in private companies , average length of service of an employee is not more than ten years . Bank staff will similarly change bank from bank and loose the stability as also lose their health in ten years of service as happens with those who are employed in private companies of modern era.
I therefore of strong view that brainless and greedy politicians are determined to spoil banks in the same way as they did BSNL and Airlines and other PS undertakings.I hope union leaders will take seriously the dirty game plan of IBA officials and MOF