The primary term for expressing the total salary package of an employee is known as the Cost to Company or CTC. Cost to Company is the total amount of investment an organization makes on its employee based on per annum.

CTC is calculated by adding all the costs and bonus together. As an example, if an employee’s salary is 25,000 and the Company pays an additional 5,000 for the health insurance, then the CTC is 30,000. An employee does not receive his or her CTC directly on hand, and the process includes paying taxes to the government.

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Cost to Company (CTC)

CTC or Cost to Company includes wages, healthcare, pension, and lodging allowances, and there is a 10% of Tax to pay from the cash amount. The cost to the Company only deals with the cost that is directly dealing with the employee.

Suppose an employee’s gross CTC is 4.62; after spending on all the wages, the employee will receive a 3.3 package at the end of the year, excluding the benefits. Some of the companies pay annual performance-based variable payout that is a commission or incentive to the CTC, and as it is performance-based, the commission can vary from 20% to 200%.

The Net Salary is reduced down from the CTC after paying all kinds of taxes and allowances. Cost to Company includes Direct Benefits, Indirect Benefits, and saving contributions. Net salary is Direct benefits minus Income tax, Employee Provident Fund, and Other deductions. 

Benefits Of CTC

Direct Benefits include in hand benefits where an employee takes the salary home after deduction of income tax plus any additional benefit. Indirect Benefits can be of different kinds; they are known as Perquisites in the legal Indian Government term. In the case of an interest-free loan, the employee does not have to pay for the interest where he or she enjoys the benefits directly from the organization. Many MNCs offer free lunch and evening snacks at their workplace.

Thus an employee can cut down the expenses on food by availing this offer from the organization. Health Insurance paid by the Company as it can cove a group or individual ones, and the cost is added to the CTC. Some of the companies pay for the office commute for their employee, but it is not at all free as the expenses are added to the employee’s CTC. Sometimes, companies offer the employees some tax-free schemes which cost them. 

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Employee’s Provident Fund (EPF)

Other than this, every employer has to pay a provident fund of 12% of the basic salary to the employee’s Provident Fund account, as shown in CTC. Gratuity is a part of CTC where the employee pays 4.81% of total yearly basic salary, per Indian tax law, with no withdrawal before five years. If any employee leaves the organization before a period of 5 years, he or she loses the amount of accumulated gratuity. 

The employee needs to maintain a budget if he or she wants to survive in the market of inflation, and for maintaining a budget, one has to maintain a routine. 

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