What is Cost to Company (CTC) ?
Cost to Company (CTC) is a term used in the field of human resources and refers to the total cost of an employee to an organization. This includes the employee’s salary, benefits, bonuses, and any other additional compensation or perks provided to the employee.
It is an all-inclusive compensation package that an employee can expect from an organization and usually used for recruitment and budgeting purposes. CTC can be an attractive offer for candidates, as it lays out all the benefits and compensation in a single figure and provides a clear picture of the overall compensation package.
It is important to note that CTC is not equivalent to take home salary, as CTC includes all the benefits, perks and taxes that organization will be paying, employee would get a much smaller amount as salary after deducting taxes and other statutory deductions.
How does an organization determine the overall compensation package (CTC) for an employee’s salary?
The calculation of Cost to Company (CTC) for an employee’s salary can vary depending on the organization and the specific compensation package they are offering. Typically, CTC is determined by adding together the following components:
- Basic Salary: The base salary that an employee is paid, which forms the core of their compensation package.
- Benefits: Additional compensation provided to the employee, such as health insurance, retirement benefits, and paid time off.
- Bonus: Additional payments to employees for good performance or for meeting specific goals or targets.
- Other benefits: Additional perks that the organization provides to its employees like company car, housing accommodation or stock options etc.
It’s important to note that CTC can also include other expenses such as employee taxes and statutory deductions. These expenses are not directly paid by the employee, but they are taken into account while determining the overall compensation package, since they will affect the employee’s take-home salary.
What is the difference between CTC and in hand salary?
Cost to Company (CTC) and in-hand salary, both are related to the compensation package of an employee, but they represent different aspects of it.
Cost to Company (CTC) is the total amount that an organization spends on an employee, including their salary, benefits, bonuses, and other additional compensation or perks provided by the organization. It’s the overall compensation package that an employee can expect from the organization, and it’s usually used for recruitment and budgeting purposes.
In-hand salary, also known as net salary, is the amount of money that an employee actually takes home after all the deductions have been made. It’s the money that an employee receives in their bank account after all the deductions such as taxes, provident fund, and other statutory deductions have been made. It is the money the employee is left with after all the statutory and organizational deductions.
So, in simple words, CTC is the total amount that an organization spends on an employee, while in-hand salary is the amount of money that the employee actually receives after deductions.
