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

Posted on 15th Aug 2016 | 2158 views

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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 ofsalary negotiationit self


What is CTCFor 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. CTC 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: Basic HRA TA 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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