As we discuss an employee’s pay, business owners in many other nations might use terminology like “gross compensation” and “net salary,” but in India, the most used phrase is “cost to company,” or CTC. This phrase refers to both the direct and indirect expenses related to paying employees. While hiring new personnel or outsourcing employees, business owners might take into account the total cost of employment.
Difference between CTC and gross salary:
Below mentioned is the major difference between ctc and gross salary:
|Basis for Comparison||CTC||Gross Salary|
|Meaning||Cost to Company, or CTC, stands for the total expense a company incurs for hiring and keeping a certain employee.||Gross salary is the annual sum of an employee’s base pay plus any additional benefits or allowances.|
|Saving contributions||CTC includes contributions to savings programmes like the EPF and ESI.||Gross Salary does not include contributions to savings plans like the EPF and ESI.|
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The employee receives direct benefits directly or on their behalf. They consist of
A gross wage and a CTC salary are equivalent. It is the amount that is directly given to an employee before taxes or other deductions are made from their paycheck aka direct benefits. The remaining direct benefits consist of various allowances that businesses may give staff members in addition to their base pay.
- Allowance for Special/City Compensation: All workers who live in the same city receive this fixed-amount stipend. It is determined as a portion of the worker’s base pay.
- Bonus and Incentive Pay: Employers in India may provide special bonuses or incentive pay to encourage staff to achieve predetermined performance goals.
- Dearness Allowance: Some businesses in India give their workers a particular sum known as the Dearness Allowance as compensation for rises in inflation and the cost of living.
- Medical Benefits: The CTC also includes, if appropriate, the employer’s expense for providing health insurance to the employee, and his family.
- Transport or Conveyance Allowance: This payment aids in making up for the cost of travel to and from the workplace for employees.
- Travel Expenses for Leave: Travel costs for employees in India are covered by this benefit.
- House Rent Allowance: If you pay your own rent in India, your employer might give you a reimbursement.
- Telephone reimbursement/allowance: The cost of a home or mobile phone plan, as well as a phone-based broadband internet connection, may be covered by this allowance.
The majority of the additional costs that go into calculating CTC in India also covers employee compensation.
- Electronic Duty: Employers should take into account both this rate and the price of providing their staff with electronic devices, such as computers on desktops, laptops, tablets, and cellular phones.
- Healthcare Benefits: Along with any premiums paid for health insurance, costs associated with providing the employee with life insurance should also be taken into account.
- Allowance for Company-Leased Accommodation: To persuade employees from other nations or regions to relocate for the job, some firms offer to pay the entire monthly rent or a portion of it.
- Taxis for the commute to work: Taxis taken to and from work may be reimbursed by the employer or paid for by vouchers.
- Supplied Food: Some firms provide their workers with free lunches or snacks at work, or they give them meal cards. Calculating the entire cost of employment should take into account the additional expenses for these benefits.
- Employee Loans: Employees can obtain automobile or housing loans from some banks in India at discounted rates. The employee’s CTC includes the difference between the market and the subsidised interest rate.
- Income Tax Savings: Per diem allowances and other extras, tax-free expenses may also be covered by the CTC in India.
- Rent for Office Space: An employee’s housing expenses may be represented by a fraction of the office rent that the employer pays to the employee.
Contributions to Saving
The employer’s contributions to employee retirement savings, which comprise the following: are the final category of costs that make up CTC in India.
- Superannuation: In accordance with this retirement plan, the company makes a certain financial contribution to the employee’s retirement account. When they retire or leave the company, the employee has access to their contributions.
- Employer contribution towards PPF: A certain portion of the employee’s pay is contributed by the employer to a provident fund account under this arrangement. To the fund, the employee also makes a contribution.
- Gratuity: Indian law mandates a gratuity of little under 5% of an employee’s basic pay. Before five years, these monies cannot be withdrawn. The employee loses their gratuity pay if they quit the company before five years have passed.