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Cost To Company | Meaning and Definition

What is the full form of CTC?

The full form of CTC is Cost to company. CTC 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. 

What does CTC include?

CTC has various components. Here are the various components of CTC:

1. Basic Salary

This is the fixed amount received by employee every month. This amount is taxable under Income Tax slab and forms 40-50% part of the salary.

2. Dearness Allowance 

This amount is provided to employees in order to cover the cost of his living in such inflation. Dearness Allowance is a fixed percentage of employee’s salary.

3. Incentives and Bonuses

This amount is provided by employees for their excellent performance. This is the extra amount paid to employees in addition to their salary.

4. Conveyance Allowance

 This amount is provided to employees to reimburse their travelling expenses. Travelling expenses paid by employees is reimbursed by the organizations up to a certain extent.

5. House Rent Allowance

 This amount is provided to employees to reimburse for the rent amount paid by them as house rent for their living. This amount is reimbursed up to a certain extent.

6. Medical Allowance

This is a specific amount provided to employees as a part to cover their monthly medical expenses. This amount is provided irrespective of your health status.

7. Special Allowance

This amount does not fall in any of the above mentioned allowance.

Difference between CTC and Gross Salary

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.  

How to Calculate the Cost to Company? 

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. 

FAQs (Frequently Asked Questions)

The full form of CTC is Cost To Company. CTC is the employee’s annual salary package.

Current Total Compensation you are earning, which includes salary, bonus, and other perks.

Cost to Company, it is the cost a company spends on hiring an employee. Gross Salary is the amount that is payable to the employee before deductions of taxes and after deducting EPF and gratuity from the CTC. 

CTC refers to salary package of an employee whereas in hand salary refers to the amount received by the employee after all the deductions.

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