How is CTC Calculated?

What is CTC?

CTC stands for “Cost to Company”. It is a commonly used term in employment and jobs. CTC is defined as the total amount of money that the company is going to spend on an employee. It will include salary, bonuses, incentives, provident fund. It is the total amount that an employee can expect from the company in the form of different direct and indirect benefits. While salary is the most basic form of compensation that an employee receives from the company, CTC is made by adding up salary and other components....

How is CTC Calculated?

CTC (Cost to Company) = Gross Salary + Benefits...

Example of CTC Calculation

Example:...

What does CTC Include?

1. Fixed Compensation: It mainly includes things that are fixed and will be paid consistently, like salary, HRA, etc. Salary is a core component of CTC which is decided at the joining time with mutual agreement between employee and employer. It is taxable, so tax will be deducted from the base salary. This is the most basic form of compensation that an employee receives as a reward for contributing to the company. In general, the employee receives a basic salary every month. In some cases, the employee has to shift for the job, as the workplace is far from his residence, so in those cases employee lives on rent. Rental employees are eligible for this allowance in many companies, in which some part of their total package is provided with salary as house rent allowance. It is a part of CTC and the total amount that the employee receives as HRA will be determined by rental agreement....

Difference between Cost to Company (CTC) and Salary

Basis Cost to Company (CTC) Salary Definition It is a total package including both salary and benefits offered by the managing company. The amount received by the employee as take-home pay. Components Includes all monetary and non-monetary components, such as basic salary, allowances, bonuses, benefits, and more. Typically consists of the basic salary and allowances, which are the taxable components. Employee’s Perception Can appear larger, but not all of it is available as take-home pay. Represents what an employee takes home and can budget with. Negotiation Tool Often used as a negotiation tool during job offers and can be higher than the actual salary. It is for understanding the actual income an employee will receive and managing expenses. Calculation Calculated by summing up all the components that make up the total compensation package, often on an annual basis. It is the actual money provided every month to employees....