A Comprehensive Guide to Cost To Company (CTC)

In the world of corporate, it is crucial for both employers and employees to comprehend the intricacies of employee compensation. This guide aims to provide clarity on the essential components of Cost To Company (CTC). It covers the differences between various components, calculation methods, benefits, and the crucial CTC breakup.

What is the Cost to Company (CTC)?

CTC refers to the total expenses that employers invest in their employees, annually. It includes not only the basic pay but also allowances, deductions, and additional benefits such as insurance, taxes, and gratuity. For example, if an employee receives a monthly salary of Rs. 200,000 along with an additional Rs. 10,000 for insurance, the total CTC would be Rs. 210,000 per month.

Components of CTC:

• Basic Pay: The fundamental building block of CTC.
• Allowances: Encompassing dearness allowance, conveyance, medical, HRA, LTA, and more.
• Deductions: Covering professional tax, provident fund, ESI, and tax deductions based on the employee's tax bracket.

Difference Between Take-home Salary and CTC

Take-home salary is the net amount post deductions, while CTC represents the total annual package, including all allowances, benefits, and expenses that the company invests in the employee.

CTC Benefits

• Direct Benefits (Monetary): Basic pay, dearness allowance, HRA, etc.
• Indirect Benefits (Non-monetary): Expenses borne by employers, such as interest-free loans, leased accommodations, health insurance and food coupons.
• Savings: Contributions to PF, gratuity, and other savings.

CTC Breakup

CTC breakup is the various parts of the components, such as benefits, allowances, and take-home amount. So, there are the following CTC breakups -

• Basic Pay: Covering 50% of CTC.
• HRA: Facilitating accommodation needs.
• EPF Contribution: 12% on basic salary and DA.
• Medical Allowances: A fixed amount for actual medical expenses.

Conclusion?

CTC is an employee's total compensation, including monetary rewards, benefits, and savings. Understanding it fosters transparency and aligns expectations. To learn more about CTC, visit our blog on A comprehensive guide to CTC.

To manage the CTC of your employees, check out our payroll software, or schedule a demo now.