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The 9 pros and cons to Cost to Company

by , 19 February 2016
Are you considering making use of a cost to company package for an employee of yours?

Well then, before doing so, it's worth understanding its pros and cons in order to ensure you're making the right decision.

In this article, we'll look at the advantages and disadvantages of the cost to company package.

But first, let's recap on what exactly is Cost to Company...

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What is it?

Cost to Company (CTC) is a way of looking at an employee's salary to show his full cost of employment.

This includes any contribution you make on his behalf.

It also allows the employee to structure his fringe benefit options, such as pension fund, in order to maximise take-home pay, should he
wish.

In a nutshell, CTC allows the employee to structure his own benefits, and in doing so they can choose to increase or decrease their contributions towards pension and provident funds.

So what are the advantages of CTC?

1. It's easier for you to  budget the real costs of salaries;

2. Employees can take advantage of any tax structuring available;

3. Your employees' salaries will be fair because they'll fund their own benefits;

4. You can easily calculate compensation packages and leave pay; and

5. You can put law changes in place very easily, without CTC being directly affected.
 
And the disadvantages?

1. It's pretty hard to understand fully. You employees may feel it's unfair that an employee with the same job is taking more money home;

2. When you change to CTC it could be very expensive trying to make salaries equal for employees;

3. Your employees can't maintain the benefits they had before, because it's now a bigger cost to them; and

4. The cost of hiring could end up being higher, as new recruits will only be interested in an increased net salary. This means you'll have to give her a higher CTC than others for the same position.
 
*So, there were the advantages and disadvantages of applying Cost to Company in your company.

Now that you're aware of them, it'll be up to you to weigh them up in terms of your own company's structure.

If you're happy with it, then page over to chapter C 017: Cost to Company in your Practical Guide to Human Resources Management handbook to see what principles you simply MUST include in it, or click here to order this invaluable resource today. 


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