You have just been selected in a company, with the offer of a fat pay cheque. However, after the first month, when you finally receive the pay, it does not seem that alluring as it was, during the time of offer. Reason being that the amount discussed was the CTC- cost to company, which is grossly different from the actual pay you receive in hand.
Many of us fail to understand the basics behind our salary, and what goes into it. It is necessary for an employee to be aware of the various constituents of the package that is quoted to him or her at the beginning.
Here are some of the ways by which an employer can show a higher CTC:
The first is the employer's contribution to the Provident Fund (PF). It may be noted that the company allots a separate amount as its contribution, while an equal amount will be deducted from the employee's side too. As a result, when the employer calculates your overall CTC, he or she adds the company's contribution too, thus showing an increase in the quoted amount.
Next is the term called gratuity. This is the amount that is paid by the employer to the employee for the services
rendered in the company. However, this will be paid only if the employee completes five years of service in the said
company. But this number is usually added in the annual CTC to show a higher amount.
Another key aspect that needs to be noted is the joining bonus and annual bonus. While the first is an one-time pay by the company which is paid to an employee after the few months of his joining, the latter is a perk offered by the firm. t is a separate amount paid annually to the employee, as a reward for their performance, thus keeping them motivated.
These two bonuses are usually added in the CTC, despite not being a part of the regular monthly income. Moving on, another way by which the employer demonstrates higher CTC is by showing the options for stock. In simpler terms, the stock options indicate that an employee has a right to buy the company’s stock, but is not obligated for the same. But this is not considered to be a regular income source for an employee.
Next is the mediclaim and life insurance. The amounts towards these two are paid by the company for the benefit
of the employee, who can refund the bills in insurance ormedical. But these amounts are added as part of the CTC, to increase the overall number and more so, because the company is paying towards it.
Meanwhile, another column that is part of the cost to company is the variable pay. This is an incentive doled out by the firm, as a way of rewarding its employees who give their best at their work. However, this amount is not fixed. It can vary depending on the performance of the employee. The maximum cost in this is added to the CTC , but if the employee brings less business the variable pay will be low.
Another interesting aspect is the inclusion of food coupons. This is also a kind of perk given out by the employer, but it cannot be compensated with cash. These food coupons can be substituted with actual money in stores. It may be noted that the amount pertaining to these coupons are also added as part of the package quoted as cost to company.
