Full Form of CTC, Meaning, Components and Calculations

The full form of CTC is Cost to Company, and it happens to be a yearly package for an employee. Therefore, it is the total expenses that an organization incurred on an employee annually. Presently, many companies pay their salary through CTC. CTC involves many things like medical facilities, travel allowance, phone bills, travel allowance, etc.

For instance, some companies like large investment banks add office space rent in their CTC package. Also, if your company offers accommodation, driver, and car they can add it to the value of their facilities. It reveals the net costs a company spends on an employee for one year.

CTC = Incentives + Gross Salary + Other Expenses

Few Facts About CTC

  • It is the employee’s yearly salary package
  • It discloses the net costs a company or organization invests in its workers over a year.
  • It doesn’t include the employee’s actual pay.
  • It comprises facilities offered to the employee during the service period.

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Basic Components of Cost to Company

These are the components of CTC

  • Basic Salary:

It forms approximately 40 to 45% of the CTC and it is the biggest component of CTC. The Gross Salary is gotten by adding other components of Cost to Company to the basic salary.

  • CCA (City Compensatory Allowance):

For companies compensating for the cost of residing in larger cities. City Compensating Allowance that is paid to Employees and will become part of the gross salary.

  • Employees Provident Fund:

It is the Employer’s Contribution towards Provident Fund and it is the same as the employee’s contribution.

  • Bonus

It is refer to the organization’s profit shared among the employees and it is 8.33%. of what is shared. Also, it could be seen as an appreciation token to reward employees for their good work.

  • Incentives:

In some companies, employee performance is evaluated yearly with an extra remuneration to be paid. At times, there is a maximum limit set for incentives for each employee.

  • Medical Allowance:

It is offered by the company for handling employees’ medical expenses. It is a fixed amount that can be added to the basic salary.

  • Leave Travel Allowance

It is the cost of traveling inland offered by the organization. It could include food and accommodation during the vacation and it is borne by the employees.

  • Vehicle Allowance:

When an employee uses a vehicle for work purposes, the company might decide to reimburse the total expenses incurred for the vehicle maintenance.

  • Special Allowance:

It is a stipulated amount offered by a company beyond the basic salary for the employee to attain certain requirements. We have different types of allowances such as telephone, conveyance, perquisites, etc.

How to calculate Cost to Company

Every company uses these different components to calculate it:

  • Life and health insurance
  • Reimbursements
  • Employer Provident Fund (EPF) or Provident Fund (PF)
  • Professional tax
  • Public Provident Fund (PPF)
  • Basic salary
  • Gratuity
  • Income tax
  • Allowance

What are other Forms of CTC?

  • Canadian Tourism Commission
  • Central Traffic Control
  • Community Technology Center
  • Canada Tibet Committee
  • Centralized Traffic Control
  • Chubu Telecommunications Corporation
  • Child and Teen Checkups
  • Common Toxicity Criteria
  • Canadian Tire Corporation
  • Community Transportation Coordinator

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How to Calculate Cost to Company in Salary?

Cost to Company = Indirect Benefits + Direct Benefits + Savings Contribution

  • Direct Benefits:

It is the employee’s net salary or the amount paid by the employer to the employee every month and it is subjected to government taxes.

  • Indirect Benefits:

It is the benefits offer to employees without them paying for it. The company pays on behalf of their employees to enjoy the CTC since is from the company expenses.

  • Savings Contribution:

It refers to the monetary value that is added to the employee’s Cost to Company

What are the Bases for CTC in an Organization 

  • Educational Qualification:

Your educational qualification as an employee contributes to your CTC. If you have a higher degree that suits your position in the company, therefore, your Cost to Company will be higher compared to other employees.

  • Previous Salary:

The present salary you will earn depends on the previous one. When you join a new organization there is a high probability your salary will decrease, therefore, it will affect the Cost to Company that you will get from the company.

  • Employee Experience:

Experience is another priority that plays an important role because the more knowledge you have, the higher your CTC.

  • Designation:

Your designation to your company determines the Cost to Company. Also, it is not all employees that will enjoy this same privilege. As a result, it will vary from one designation to another.

  • Promotion:

The Cost to Company enhances when you obtain a promotion with an improved basis salary. You can expect better inclusions of other provisions.

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Frequently Asked Questions

  1. What is the expected Cost to Company?
  2. The expected CTC is the benefits an employee is expecting from a company in terms of his or her CTC.
  3. Is Cost to Company similar to the take-home salary?
  4. take-home pay is the net amount of an employee’s income after the deduction of benefits, taxes, and other things. On the other hand, Cost to Company refers to the total amount a company is spending on their employees annually such as benefits, allowance, and take-home salary.
  5. What makes up CTC?
  6. It includes different things that sums

up salary structure like basic salary, allowance, communication, pension fund, medical, house rent allowance, etc.

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