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3 principles to know BEFORE applying a 'cost to company' package in your company

by , 22 February 2016
So, you've found the perfect candidate for the job. And you believe that the cost to company (CTC) package seems perfect.

But the fact of the matter is that this package can be extremely confusing to both you and the employee.

So before applying this package in your company, make sure you know these 6 principles of a cost to company package to make sure you're structuring it correctly...


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Principle#1: Ensure your employees and new hires understand fully what CTC (Cost to Company) means

You'll probably find that many employees will have no clear idea of what a cost to company package is and how it affects their salary.

Principle#2: Found out what percentage you'll use for the retirement fund package

In order to calculate retirement benefits in a CTC structure, your employee must choose a percentage of up to 7.5% of his pensionable salary.

NOTE: You can also use his retirement percentage to calculate disability benefits as well.

Principle#3: Find out how CTC affects the rules of retirement and medical aid funds

If there's one CTC question that'll be asked a lot, it's around whether an employee will pay more tax if her salary is in one 'basket'.

The answer is 'no'. They're in the same tax position as before.

But depending on their salary structure and their contribution to their retirement annuity fund, they'll get better tax benefits.
*So there are 3 principles to know BEFORE applying a cost to company package in your company, in order to structure it correctly.

To learn 3 other vitally important principles around CTC packages, page over to chapter C 17: Cost to company in your Practical Guide to Human Resources Management handbook, or click here to order it today.
P.S. The Employment Equity Plan Workshop 2016 is just around the corner. Email us at seminars@fsp.co.za and you'll be the first to get more information!

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