Cost to company refers to the amount of money a firm spends on an employee on an annual basis. The cost to the company for each employee is determined by their base wage and other factors. In layman’s words, it’s also known as the whole wage package, which refers to the costs a firm incurs in hiring, training, and retaining personnel.
Cost To the company is not the same as Gross Salary. The amount an employee receives as pay before deductions are referred to as gross salary. Gross salary, as opposed to net salary, is the amount of money earned on a yearly basis before any deductions or taxes are taken into account. Cost to the company, on the other hand, refers to the overall cost to the firm of the employee, including all perks.
The CTC is the sum of all the financial and non-financial benefits given to an employee. The CTC can be calculated by using the following formula:
CTC= Gross Salary + Direct Benefits + Indirect Benefits
For example, if an employee’s salary is Rs. 35,000 and the company also pays an additional bonus of Rs. 5,000 for health insurance, the CTC is Rs. 40,000.
