Glossary
What is CTC?
What cost to company means, how it differs from gross and take-home pay, and how to work it out from a salary structure.
Updated
In short
CTC, cost to company, is everything an employer spends on an employee in a year: gross pay plus employer contributions such as PF. SimpleERP shows the monthly cost to company in every salary structure preview.
CTC, cost to company, is the total amount an employer spends on an employee in a year. It adds the employer's contributions, such as provident fund and ESI, and any benefits the employer pays for, to the employee's gross pay. Offer letters usually quote CTC, so the employee's take-home pay is lower than CTC divided by twelve.
CTC (cost to company): a worked example
Karthik R, store keeper at Lakshmi Steel Furnitures, from salary structure to CTC.
| Line | Monthly | Yearly |
|---|---|---|
| Gross pay (Basic, HRA, conveyance, special allowance) | ₹30,000 | ₹3,60,000 |
| Employer PF, 12% of Basic | ₹2,160 | ₹25,920 |
| Cost to company | ₹32,160 | ₹3,85,920 |
| Employee PF and professional tax deducted | ₹2,340 | ₹28,080 |
| Take-home pay | ₹27,660 | ₹3,31,920 |
FAQ
Questions, answered
What is the difference between CTC and in-hand salary?
CTC is the employer's total cost, including its own PF or ESI contribution. In-hand salary, or net pay, is gross pay minus the employee's deductions such as PF, professional tax and TDS. For Karthik R, CTC is ₹32,160 a month and in-hand pay ₹27,660.
Does CTC include bonus and gratuity?
Sometimes. Some employers fold a target bonus, gratuity or insurance premiums into the CTC they quote, which widens the gap between CTC and monthly pay. State in the offer letter exactly what the CTC includes.
Is CTC the same as gross salary?
CTC is not the same as gross salary. Gross salary is the sum of earnings before the employee's deductions. CTC adds the employer's contributions on top of gross, so CTC is always at least equal to gross pay.
Where do I see CTC in SimpleERP?
In each employee's salary structure. As you set Basic, allowances, deductions and employer contributions, the preview shows gross, deductions, net pay, employer contributions and cost to company for a full month.
Related
Keep reading
Gross vs net salary
Gross is total earnings before deductions; net is what reaches the employee's bank after them.
Read moreProvident fund (PF)
A retirement saving run by the EPFO, funded by matching employee and employer contributions, commonly 12% of Basic each.
Read moreSalary structure in India
Basic, HRA, allowances, PF, professional tax and TDS explained as concepts, with a worked payslip and a loss-of-pay example.
Read more
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