CTC Vs Take Home pay-------The war goes on

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When the answer is pre decided there can be many questions that can fit in to justify the reply as right. The fixing of salary structure is similarly done in many companies. The employee stands his ground to state what should be his take home pay, the company equally firmly stands on its cost to company known as CTC. The permutation and combination of various components of the pay structure is then decided with the statutory compulsions of PF, ESI, Professional tax etc are also been put up with.  

The basic pay is kept low in order to reduce the effect of payments that are calculated as a percentage of basic. Special allowance, other allowance, house rent allowance, transport, medical reimbursement are the bifurcations that decide the take home. What is so ‘special’ and what is the ‘other’ factor of allowance is something hardly clarified by any company.  Some companies also add bonus, gratuity etc that an employee gets only on completion of specific period.

There is many a slip between the cup and the lip. Many agreed recruitments do not come thro in the battle of ‘take home’ Vs ‘CTC’. It is understandable in the case of lower salary than IT limit or around that where people insist on higher take home to meet ends easily. But the one paying tax and also high tax go on negotiating take home pay even insisting that the pay demanded has to be after deduction of income tax.  Hence there would be many rounds of discussion and changes made in the taxable and non taxable components with vehicle and petrol as perks adding to the debate.   

Many companies add intangible and almost invisible components like performance bonus, LTC, loyalty allowance etc that convert discussions into arguments and most often snaps the pay deal. Potential employees view such components of pay with suspicion rightly so, as the components inherently carry right of the management for interpretation. If leave is not granted LTC goes waste automatically. Claiming such components as integral part of pay pocket is typically    viewed as ‘unintended pay’ by many.

The rules of income tax department do come in to picture to decide the pay structure in high salary category. While labor laws are many, none specifically state or provided for deciding the components of pay structure resulting in cases like additional special allowance when one without the addition itself is unexplained.  Unfortunately the HR profession has been recognizing juggling with the pay structure as a KPA of an HR executive. Though absence of control through legislation is the main reason, the heads of HR Forum have a role to play to reverse the trend with proper representation to the Government. After all human resources management is managing with knowledge of psychology, wisdom and industry specific needs and not by interpretation of loopholes. 

The government has to ensure this and HR has to be ethical enough to take the initiative and support the government to bring about the changes. Until then whatever win-win situation is created would be short sighted and short lived.

               

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