Understanding Salary Terms: Can You Help Clarify CTC, Gross, and Net Salary?

Hi friends,

Can anyone please clarify the following terms to me with examples? I'm a bit confused with these terms.

1. CTC
2. Gross salary
3. Consolidated
4. Net salary
5. Salary breakup
6. Components of salary

Please, someone guide me. Thanks! :)

Tweeps

CTC: Cost to company - Total cost incurred for an employee including cash and perks per annum.

Gross salary: Monthly total salary before deductions.

Consolidated: Paid to trainees/temporary employees without any salary breakup components like Basic, DA, HRA, Conveyance, etc.

Net salary: Monthly take-home salary after deductions.

Salary breakup: Showing various components separately like Basic, DA, HRA, Conveyance, etc., and arriving at Gross Salary.

Components of salary: Various components like Basic, DA, HRA, etc.

Thanks for the information. Could you please explain it to me with the help of an example? Does CTC include employees' as well as employers' share of PF and ESI? Can someone please explain with an example, CTC with salary breakup?

Hi, you may find the following useful...

Basic------------------------------------- 4000.00
DA----------------------------------------- 2500.00
HRA--------------------------------------- 2000.00
CCA--------------------------------------- 1500.00
Gross Salary (A=sum of above)--- 10000.00

Add, Employer's Contribution + Reim. (B)

PF @13.61% on Basic------------------------ 545.00
Bonus @ 8.33% on Basic-------------------- 334.00
Other Reimbursements (if any)----------------- 0.00
CTC (A+B)------------------------------------- 10879.00

Net Salary/Take Home
Gross Salary--------------------------------------- 10000.00
Less, Employee's Contribution to PF @12% on Basic---- 480.00
Professional Tax (statewise)------------------------------------------- 0.00
NET SALARY-------------------------------------------------------- 9520.00

(ESI will be applicable if the Gross is less than Rs. 10000)

Kindly let me know if you require some more details...

Thanks & Regards,

Sudip Das

13.61% = 12% + 1.61% is (administrative charges 1.1% + ELDI 0.5% + administrative charges 0.01% = 1.61%) will be the contribution by the employer. However, 13.61% on Basic 545.00 cannot be calculated/deducted from the employee.

Hi friends,

Please find attached the file for CTC Calculation. I believe it will clear all your doubts.

Warmest Regards,
Mohan M.S
"willingness to walk the extra mile to achieve excellence"

Employer contribution charges are 13.61%, and you explained 1.61% in detail as (EDLI + Admin charges + Admin charges). It's good. Why again do you add admin charges the second time? Can I know that? Please explain to me why we are adding admin charges two times.

I think one is for the government, and one is for employer contribution. Is it right?

Please reply to me!!!

Dear Sudip,

Thank you for your valuable contribution. I would like to have a clearer idea about it. Suppose the person's basic pay is Rs 12000, and we are giving him the PF, which, as per calculation, amounts to Rs 1440. When including this in CTC, should the employers deduct 13.61%, i.e., Rs 1633, or simply Rs 780? Please help me out.

Dear Naurin,

Daily activities of an HR Executive's job include interviewing candidates. Once he is selected, send him the offer letter after negotiating the salary with the candidate. Once he joins, introduce him to the entire staff, provide him with the training required by preparing a training calendar (do that by sitting with the HR manager and HOD for the department he is selected).

Along with that comes the confirmation of the employees, employee engagement activities, etc.

Hope that has answered your question.

Ruchi

Sir, please tell me if leaves like Earned Leave or Privilege Leave are also part of CTC. Regards, Satish

Dear Tweeps,

Here are your answers:

- CTC: Means total salary with PF, Gratuity, or superannuation.
- Gross salary: Without PF and excluding tax deductions.
- Consolidated: With PF & ESI.
- Net salary: In hand or take home after deductions.
- Salary breakup: Salary details like Basic, HRA, DA, Conveyance, Mobile Bills, etc.

Thank you & Regards,
Bhagwan Tolani
9784539090

Dear Satish,

The earned leave will not be included in the cost to the company.

Warmest Regards,

Mohan M.S.

Thank you, ksa04, for the breakdown. I missed explaining the breakdown, which you efficiently covered.

Firstly, let me address Yojita regarding the 1.61% (providing the total breakdown for clarity). The employee's total contribution of 12% goes to the PF Fund, while the employer's contribution of 13.61% is divided as follows: 8.33% to the Pension Fund, 3.67% to the PF Fund, 1.1% for Admin. Charges for PF, 0.50% for EDLI (Employee Deposit Linked Insurance), and the remaining 0.01% for Admin. Charges for EDLI.

I hope this clarifies things.

Now, addressing Mr. Singh, you mentioned the Basic as Rs.12,000 per month, and the applicable Basic ceiling for PF is Rs.6,500. In this scenario, it is up to the employer and employee to decide the PF Contribution amount. If the employer includes 13.61% of the Basic (Rs.12,000) in the CTC to enhance the employee's CTC, the employee must also contribute 12% of their Basic. Therefore, the Employee's Contribution would be Rs.1440 (12% of Rs.12,000), and the Employer's would be Rs.1633 (13.61% of Rs.12,000) instead of Rs.780 as calculated. Although the contribution offers tax benefits, the decision lies with the employer and employee.

I hope this clarifies any uncertainties.

Regards,
Sudip

Hi friends,

Can anyone please clarify the following terms to me with examples? I am a bit confused with these terms:

- CTC (Cost To Company)
- Gross Salary: without any deductions
- Net Salary: after all deductions
- Salary Breakup: total salary divided into parts (for example, earnings - basic, HRA, DA, TA, etc.; deductions - TDS, P.F, P.T, LOP, ESI, Insurance, etc.)

Could someone guide me? Thank you :)

Tweeps

Hi Friends,

The PF contribution of the Employer is also a part of CTC; most companies include it in the structure to make the package healthier.

Regards,
Deepa Palav

May I know what PF is and how an employee becomes eligible to receive it?

PF @ 13.61% on Basic - $545.00
Bonus @ 8.33% on Basic - $334.00

The 13.61% is calculated on the actual basic salary amount.

Dear Naurin,

These are activities that motivate the employees; you can refer to them as icebreakers that are used as stress busters. They can be fun activities that can be carried out once a month, depending on the number of employees in the organization.

Ruchi