Cost to Company (CTC) is the yearly expenditure that a company spends on an employee. Each employee spend depends on their salary and variable. CTC is calculated by adding salary and additional benefits that an employee receives such as EPF, gratuity, house allowance, food coupons, medical insurance, travel expense and so on. CTC in colloquial terms is the cost an employer bears to hire and sustain its employees.
Formula: CTC = Gross Salary + Benefits.
If an employee's salary is ₹40,000 and the company pays an additional ₹5,000 for their health insurance, the CTC is ₹45,000. Employees may not directly receive the CTC amount as cash.
Gross salary is the aggregate amount of compensation discharged or spent by an employer or company towards the employment of an employee, before any deductions. The aggregate compensation would be the Cost to Company or CTC to employees.
CTC = Direct Benefits + Indirect Benefits + Savings Contributions
CTC contains all the monetary and non-monetary amounts spent on an employee. These include:
Expected CTC is a term used to understand what a candidate is expecting from the organisation in terms of his/her CTC.
Take-home pay is the net amount of income received by the employee after the deduction of taxes, benefits, and other voluntary contributions from their paycheck.
Whereas CTC or Cost to Company is the sum or total amount a company is spending on an employee in a year. It includes the Take Home Salary along-with other benefits and allowances.
The CTC is made up of several different components including the take home pay, benefits, allowances, and more. Here are the crucial components of the CTC break-up:
There are two kinds of benefits, direct and indirect:
When negotiating, make sure to try and increase the direct benefits component as much as possible. Here are a few ways:
In-hand salary is the net amount of income received by the employee after the deduction of taxes, benefits, and other voluntary contributions from their paycheck.
Whereas CTC or Cost to Company is the sum or total amount a company is spending on an employee in a year. It includes the In-hand salary along-with other benefits and allowances.