What is Cost to Compnay (CTC) and What are the components of CTC?

Cost to Compnay (CTC)

Cost to Company is a buzz word to describes about the pay structure of a company including all benefits. But it is denoted in different way from the perspective of management. A fresher can ask and clarify the human resource personnel at the time of salary negotiation it self

What is CTC?

For the Company: Cost to company is a term which essentially implies the amount of expenses the company will spend on an employee in a particular year. What may be an expense for the company need not necessarily be salary for the employee.
For employees: Cost to company is an amount projected by the company as salary but is never what is actually received by the employee in cash.
For the Finance Manager : It is the total cost incurred to hire, maintain, retain the employees and may also include a part of overhead cost allocation.

► Recruitment Cost
► Base salary
► Bonuses
► Administrative
► Office Space
► Technology
► Benefits

CTC includes various components like:

• Salary : It includes Basic, DA, HRA, Allowances
• Reimbursements : It includes bonus, incentives, reimbursement of conveyance/medical/telephone/, benefits extended through various schemes like housing/vehicle/furniture/ Air-conditioners etc.
• Contributions: I t includes the benefits offered by the company like PF, Super Annuation, Gratuity, Medical Insurance, etc. Some companies also offer Leave Encashment, Stock Option Plans and Non cash concessions.
• Tax Benefit: It includes only Stock Options.

What is the difference between CTC & Take Home Salary ?

Most of us ot aware of CTC and take home salary and most people confuse about the both. This confusion takes place even in experinced employees also.

• Gross salary
• Net salary (Take Home Salary)

Cost to company (CTC) is the total cost that an employee is incurring in a company.

Gross Salary is the one which you see every month. But this is before any deduction.

Net Salary is what an employee get to his/her hand after deductions.(this is the take home salary)
The relation between all three

• Gross = CTC – Other benefits
• Net = Gross – Deductions

CTC and its components at a Glance:

Other Allowance
Mobile Reimbursement / Month
Gross Per Month = Sum of all the above.
Gross Per Annum= 12*Gross/Month
PF Contribution= 12% of Basic/Annum
ESI Contribution = 4.75% of Gross/Annum
Medical = The mediclaim facility provided to an employee who are not covered under ESI as the maximum ceiling for ESI is 10000/Month.
Getting more than this will be covered under Mediclaim or it depends on company policy

EX-Gratia/Bonus = A fixed amount as Bonus

Annual Fixed Gross Cost= Gross/Annum+ Ex-gratia

Annual Total Cost or CTC = AFGC + PF+ESIC

Annual total cost is also called as CTC.


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