What is CTC in salary? A Detailed Guide

Each day, someone new is entering the corporate sector as a professional. Depending on their skills, job roles, profile, and position, everyone is drawing different amounts of remuneration too.

However, if they’re asked what all components make up their salary, they’d most probably give off puzzled looks. To wipe off those doubts and questions from the minds, this blog will clear up some of the core elements. Attributes like CTC, what is CTC, CTC full form, what is CTC in salary, how to calculate CTC, etc., and some more, are going to be illustrated.

We’ll set forth a description of Cost to Company, and then the other components accordingly.

1.  What is CTC and CTC full form?

Cost to Company or CTC as it is known by most is the monetary amount a company spends on an employee when hiring or anything.

CTC comprises components like House Rent Allowance (HRA), Provident Fund (PF), Medical Insurance, etc., among other contributions that are added to the basic salary.

2.  What is CTC in salary?

Still, a lot of people aren’t aware of what is CTC in salary. The Cost to Company refers to the total salary package inclusive of all monthly components such as the base pay, sundry allowances, etc., and annual fractions such as gratuity, variable pays, annual bonus, etc.

To put it simply, CTC is the cost an employer carts to recruit and retain their workforce. To check your CTC roughly, you can always use the simple formula to calculate it.

CTC = Gross Salary + Benefits.

Understanding CTC and components of the payroll is a crucial aspect for every individual working in the corporate sector. Know all the components that together make-up your monthly/annual salary.

3.  Constituents of Cost to Company (CTC)

As elaborated, CTC involves several elements that together make up the end result. To know a few common components of cost to company, we’ve compiled a table to portray the same.

CTC constitutes the sum total of all direct benefits (annual allowance of an employee) + all indirect benefits (the amount by an employer for employees) + additional contributions (saving schemes of the employee).

Direct BenefitsIndirect BenefitsSaving Contributions
Base PayOffice RentsGratuity
HRA
(House Rent Allowance)
Income Tax SavingsEPF (Employer Provident Fund)
LTA (Leave Travel Allowance)Company LeasesPension Schemes
Vehicle AllowanceInsurances paid by the employer
Medical AllowanceFood Coupons/Meals
DA (Dearness Allowance)No interest loans
Phone Allowance
Special Allowance
Conveyance Allowance
Incentives
Bonuses
{TABLE DEPICTING SOME EXAMPLES AND COMPONENTS OF CTC}

4.  How to calculate CTC?

CTC includes all monetary and non-monetary amounts that are spent on an employee.

As we mentioned;

CTC = Gross pay + Direct benefits + Indirect benefits + Savings contributions    or    CTC = All Earnings + All Deductions

To attain the final result, we’ll have to calculate a few things initially.

Gross Salary = Base Pay + Direct Benefits

For example – Mr. X is drawing a salary of 50,000 and the company pays some additional amounts such as health insurance, conveyance allowance, EPF, etc., which amounts to around 40,000. So, his CTC would be 90,000 by summing all earnings and deductions.

Now that we’ve cleared how to compute your CTC, we’ll have a brief discussion over other fields. Take-home salary is yet another important aspect when it comes to an employee’s salary. The sum amount that an employee is finally credited with. Also called salary in-hand.

 ∴ Take-home salary = gross salary – [12% pf contribution(Employee) + LWF(Employee) + ESIC (If Applicable)]

5.  Know your salary and its components through a Salary Calculator

Salary calculators are the digital tools available today to compute your salary and its components within a few seconds. Whatever amount a person is drawing monthly and what are the components of that monthly sum, can be known through a salary calculator.

Salary calculators are often integrated with all local, state, and national taxes, laws, and norms.

A diverse range of salary calculators are at people’s disposal nowadays. To name a few prominent ones; take-home salary calculators and income tax calculators are the ones used the most.

6.  Process Payroll with Zimyo

Zimyo payroll software helps businesses in multiple ways, and a few are listed below to give a brief insight.

  1. Zimyo payroll management software processes the entire organization’s monthly salary in just 3 clicks.
  2. The software when integrated with the recruitment system – auto-calculates CTC as per the stored information and defined rules.

The employees can access their CTC breakup, salary slips, tax regimes, and declarations, etc., whenever they require.


More from Zimyo

Employee Salary Slip Format in India

Get latest updates on HR trends and technology

Follow Us

Up to 50% off on
HRMS & Payroll subscription!

More Insights!

hr trends

HR Trends of 2022 and Beyond

The pandemic accelerated all the changes in workplaces that were eventually due. A flurry of modifications such as remote and hybrid work cultures, virtual meets

Read More »