If you have just joined a company upon graduation and are busy wondering what the terms ‘CTC’ refers to, you need to read on. Every company has its format when calculating an employee’s reimbursement package. But the CTC or cost to the company essentially remains the same.
So if you are wondering, “what is CTC in job,” you need to understand that the term is a dead giveaway. In simple terms, the term is generally used by a company to calculate the overall cost due to hiring employees.
Essentially, the company would like to calculate the total cost to the company due to hiring a single employee. Calculating the CTC is not that hard. It is quite simple. They would take the reimbursement package (not the net, but gross pay). They would then include various other benefits that the employee receives to arrive at the CTC figure.
● What is the CTC?
You can be running an enterprise, a company, and even an organization. But you must keep track of all the incoming funds, payments, as well as liabilities and costs.
The CTC figures mainly in the latter half. Calculating the CTC will enable the company to keep track of the overall cost of hiring a specific employee. So if you are wondering what is CTC in job, well, it’s the sum of gross salary/ reimbursement + benefits.
And a company needs to calculate every cost as it seeks to keep its expenses down for obvious reasons. And reviewing the CTC should enable the company to evaluate the employee’s performance against the overall cost of hiring that employee.
● Calculating the cost:
While in general terms, the CTC is the sum of gross salary + any benefits accrued to the employee, it tends to be more. For example, the CTC can be said to be a sum of direct benefits + indirect benefits + savings contributions.
Granted that each company is bound to calculate it differently, the simplified version would be the sum of gross salary +benefits. But given the differences in calculating the CTC, the simple formula is the sum of direct benefits, indirect benefits, and any savings contribution you may have made.
For example, if a certain part of your salary is deducted for the employee provident fund or the EPF, the same would be included when calculating the CTC.
● What does it generally include?
If this is is your first time as an employee, it is only natural for you to question CTC and what it includes. But overall, it comes down to all the monetary and non-monetary amounts that a company has expanded on your behalf.
For example, it would naturally include your salary, and any allowances, including dearness allowances, would figure in the same. It would also include your bonus, conveyance allowance, and even the HRA or house rent allowance.
Do note that indirect benefits vary from one company to the other. And naturally, the CTC is bound to be affected as well. But this is how it is generally calculated.
● Is the CTC equal to the take-home package?
Again, the CTC includes the overall cost to the company due to hiring a specific employee. And the take-home pay would be the total or gross pay minus any deductions that the company may levy.
It can range from tax to employee provident fund deductions, medical insurance, etc. It is essential to note here that not all companies deduct their employees’ income at the source but instead leave it to them to settle any tax dues.
As you can see, this is what CTC is all about. However, do note that when calculating the overall CTC to the company, you would also be required to consider an employees’ medical allowance.