CTC: Cost To Company
Nowadays, while finalizing your salary, HR tells you the final CTC. Here CTC stands for Cost to Company. It is the total amount an employer spends on his employee in a year. This includes take-home salary (net salary), all deductions (by adding PF pension) as well as all the benefits that the company gives to its employees such as cabs, food, lodging, etc. In general, it is an employee’s salary package, which is much higher than the traditional salary.
Benefits through CTC -
CTC mainly consists of three components ie direct benefit, Indirect Benefits, and savings contribution.
1) Direct benefits -
Direct benefits are called benefits that are added to the employee along with salary, these benefits are as follows –
- Basic Salary
- Conveyance Allowance
- Dearness Allowance
- House Rent Allowance
- Vehicle Allowance
- Mobile Phone Allowance
- Incentives or Bonuses
2) Indirect Benefits -
Indirect benefits are called the benefits that an employee receives other than salary, these benefits are as follows –
- Interest-free loans, if any
- Company Leased Accommodation
- Income tax savings
- Office Space Rent
- Food Coupon, Subsidized Meals
3) Saving Contributions -
These facilities are available to the employee only after taking retirement from the job, the saving contributions are as follows –
- Employer Provident fund
- Superannuation benefits
Net Salary or Take Home Salary
Net salary means the salary that the employee actually takes home after all taxes and deductions. Net salary is made out of gross salary after income tax deduction, public provident fund, and professional tax deduction. CTC is not the amount an employee takes to his home. Take home amount is net salary to which gross salary and deduction are not added.
Net salary = gross salary – deduction
CTC = gross salary + other benefits
CTC = Net Salary + Deduction + Other Benefits
Take-home salary (net salary) is usually much lower than the CTC paid to an employee. Mostly, the net salary varies from 35% to 50% of your CTC.