How to calculate Employees’ Cost-to-Company (CTC)?
For Cost-to-Company CTC Calculation You Must Know All The Benefits Of An Employee From The Company
Cost-to-Company or CTC is the method to find out the actual cost incurred by an employee because of being part of the company. CTC is not just the salary or benefits of the employee paid by the company for his or her work. CTC is much more than that.
What is CTC in salary for example
CTC is the cost to the company for an employee. So, not just salary or benefits but it includes all kinds of facilities the person enjoys. Therefore, the higher the position, the more Cost-to-Company, CTC is incurred by the employee. That’s why, higher positions are few in the company.
You have to calculate Cost-to-Company, CTC for a whole year. Not for a month. And all the benefits incurred within the year are also part of the Cost-to-Company, CTC. Thus, it helps the HR and Finance division of a company to determine the expectation they have from an employee.
Cost-to-Company Example
There are many parts of Cost-to-Company, CTC. As a result, a general company’s structure of employee salary and benefits are as follows:
- Basic Salary
- House Rent
- Medical Allowance
- Conveyance
- Special Allowance
Mainly, most of companies possibly provide the employee with the following benefits:
- Medical Insurance
- Taxation
- Provident Fund
- Special Fund
- Laptop or PC
Besides, if the company pays a subsidiary for the food of the employee, it will also go into the CTC.
So, Cost-to-Company, CTC can be formulated as follows
Cost-to-Company (CTC) = Direct Benefits + Indirect Benefits + Company Contributions
As a result, we can clearly understand that all costs associated with an employee borne by the company are part of CTC.
Basic Makes Around 50% of Gross Salary
Total Cost to Company Calculation AKA CTC Calculation format:
X is an employee of ABC company. His basic is 10000/= per month. We will show an example of how to calculate his CTC.
So, Even if f X has a basic of $10,000/= per month and a gross salary of $20,000/= per month, his CTC or Cost-to-Company is $350,000/=.
This is the calculation method of CTC.
Is CTC Monthly or Yearly?
An employee is recruited and his basic is fixed, then his CTC is calculated for a whole year from his or her joining date. Therefore, CTC is not monthly but calculated yearly.
Frequently Asked Questions
What are the components of cost to the company?
All the benefits an employee receives from an employee is part of CTC. It includes –
Gross Salary
- Basic Salary
- House Rent
- Conveyance Allowance
- Medical Allowance
- Dearness Allowance (DA)
- Travel Allowance (TA)
- Special Allowance etc.
Benefits
- Health Insurance/Medical Aid
- Taxation
- Devices
- Food Subsidiary
- Awards
- Events
- Provident Fund
And any other benefits he or she may receive within a year.
Is PF included in CTC?
Yes, PF as well as medical allowances, all are included while you calculate the CTC for your company. All types of monetary or non-monetary benefits will be converted to monetary and included in the CTC.
Is gratuity part of CTC 2021?
Gratuity is part of the Cost to Company (CTC) calculation. As, it is a benefit provided by the company, it has values in monetary terms.
For a long time, it has been a matter of debate, if gratuity should enter CTC or not as CTC is calculated for a year, but now, it is part of the employee termination benefit and can be calculated as CTC.
What is the cost of the company package?
A CTC or cost-to-company package, often found in ads, is part of recruitment which shows how much the company is willing to spend behind you fully. It is calculated with the gross salary of the employee so that the company gets a clear picture of CTC for recruiting any person for a position.
Conclusion
CTC is a very important part of the recruitment process and overall budgeting for the HR department. Formats of benefits vary from company to company. So, you should find first which benefits must go to the CTC calculation before proceeding.
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