Understanding CTC vs. Monthly Salary: How Do You Calculate and Present It?

Hi Folks & Seniors,

Hope everyone is enjoying their respective jobs. I would like to request you all to sort out the difference between monthly salary and CTC offered in the offer letter. I want to know how to calculate the monthly salary of each individual every month. I hope that calculating Cost to the Company is different from the salary paid each month.

Please segregate and explain how to calculate Cost to the Company - what all things to be added and how to give an offer letter by showing each individual item in the offer letter like basic, HRA, transport, special allowance. Also, I would like to understand more clearly about the salary slip format.

I hope HR folks and seniors will help me a lot. Awaiting your valuable responses.

Regards,
Ramesh

Hi Ramesh,

CTC includes Basic Salary + PF + HRA + TA + DA + ESIC + PT. When you receive your monthly salary, these deductions will be made: PT + PF (of your part i.e. 12% from Basic salary) + ESIC (of your part i.e. 4.75% from Basic salary). That's why there will be a small difference between the monthly salary and the mentioned CTC in the offer letter.

Regards,
Tarun

Hi folks and senior,

I am also confused about salary. If we pay the salary to every employee for 26 days + 4 days off, and my monthly gross salary is 10000, with my present days being 26 out of 30 in the month, how do I calculate it?

If I calculate this way, what is the normal calculation:
Total salary / days in the month * actual worked days
10000 / 30 * 26 worked days = 8666.67. What about days off? Are they payable or not? Please help me as I am really very confused. If possible, it's urgent, so reply to my email id: kalpa.solanki@gmail.com

Regards,
Kalpa

Dear Kalpa,

As per the total days, you have to calculate the salary. For example, in the month of May, we have 31 days, so you have to divide your salary by 31. Sundays will be included. Just clarify your points, then we can discuss.

Hi dear,

The working days are calculated as normal, and salary is given. But for weekends, the logic is if you have worked on Friday and Monday, you will receive salary for Saturday and Sunday as if they are normal working days. This is because it is assumed that if Saturday or Sunday were working days, you would have come to the office. However, if you take leave immediately before or after the holiday, you will not be paid. This assumption is based on the idea that if the holiday was a working day, you would be absent. This law is universal all over the country.

Dear Ramesh,

Please find below the details of the yearly CTC format. Please note that the salary heads in the monthly salary can be named differently, but you can understand from the below salary structure about what all comes in the monthly salary and what all goes in the yearly.

SALARY PACKAGE
NAME: Mr. Nitesh N Patel
DESIG: Executive-QA/QC
DEPRT: Q.C.
GRADE: O-II

SALARY STRUCTURE
Basic: 6600 = 6600 PM (depends on company's gradation)
Mgt allow: 6700 = 6700 PM (depends on company's gradation)
CAP: 4898 = 4898 PM (depends on company's gradation)
P.Pay: 2680 = 2680 PM (balance after all the above)
Salary: 20878 PM X 12 = Rs. 250536/-

PF: 7920 PA (12% of basic)
Bonus: 6597 PA (8.33% of basic)
Gratuity: 3168 PA (15 Days basic salary X 12)
Salary Per Annum: 268221 (PA CTC)

If you still have confusion, please feel free to write to me.

Regards,
Bharat

Hi dear,

The difference between salary and CTC is as follows:
Salary is generally the net amount that an employee takes home, whereas the CTC is the cost to the company incurred because of the employee. For example of CTC: Basic + HRA + field allowance + PF + PT + ESIC* + other benefits like mobile/medical/etc = Gross salary. ESIC is 4.75% of Basic + HRA for the employer and 1.75% of Basic + HRA for the employee. In gross salary, ESIC is for the employer at 4.75% of Basic + HRA.

For salary: Basic + HRA + field allowance + PF + PT + ESIC* + other benefits like mobile/medical/etc = SALARY. Please note ESIC here is for the employee at 1.75% of Basic + HRA.

Hope this will help.

Hi, Dear,

Please note that the salary is payable for fixed components such as the general company's salary components:

01. Basic
02. HRA
03. Med Allow
04. Spl Allow
05. Conveyance
-------------------
Gross
-------------------

Apart from this, deductions include:
- P.F (Employer)
- E.S.I
- P.T
- Gratuity
- Bonus
---------------
CTC
-----------------

The salary is calculated based on the gross amount, and deductions are made for P.F (Employer), E.S.I, and P.T. Subsequently, we arrive at the net salary.

I hope I have addressed your query.

Regards,
Suraj Varma

Dear Ramesh,

I would like to suggest that after understanding the breakdown of salary and the percentages, as per your company's policies, you can create your own Excel format by inputting all the formulas. Practice with someone's salary, and once it is perfected, you can use the same template for every employee's salary.

For example, you can utilize the information shared by Mr. Bharat, input it into an Excel format, practice for a while until you have a better understanding, and then create your own format according to your policies. I hope this could be helpful.

Please feel free to ask if there is any confusion.

Listen to Suraj; he has given you the best solution as per the Components in Salary Slab.

That's the simple and straight reply. Regarding calculations:

For example, if your Gross CTC is 2,50,000 and you want to know Monthly, divide it by 12:

2,50,000 / 12 = 20,833. This is Your Monthly Salary, simple.

Basic Components are calculated in the following way:

1. Basic - 50 or 40 percent of CTC (Gross Salary, i.e., 20,833 from above). It can even be 25%, 30% depending upon the employer's or HR's choice. Mostly it is 40 to 50%. This amount is taxable.
2. HRA - It has to be 50% of Basic.
3. Medical Allowance - Ideally 1250/month in most companies for tax rebate.
4. Conveyance - Ideally 800/month for tax rebate (most companies apply).
5. Special Allowance - This is the balancing figure for the remaining amount. This amount is fully taxable.

For example, if a person has a salary of 12,000/month (gross):

Basic - 6000 (50% of CTC) (Taxable)
HRA - 3000 (50% of Basic)
Medical Allowance - 1250 (As one can avail for tax rebate)
Conveyance - 800 (for tax rebate an ideal figure which 90% companies use like Medical allowance)
Special Allowance - 950 (Balancing Amount) - (Taxable)

Regards,
Rashmi Bhalerao

C.T.C. = Salary + Double PF (Employee as well as Employer Share - Generally, companies show one PF in the salary slip but deduct the Employer's share also) + Bonus (one month basic salary / 12 - Bonus will be paid after one year, generally in Diwali time) + L.T.A. (This is also calculated like a bonus and will be paid later) + Medical Allowance (If any and like a bonus will be paid after one year) + E.S.I.C. (If applicable - is applicable for certain employees – Gross salaries below 10,000/- Companies are deducting Employee + Employer Share or one part i.e. Employee share only) + P.T.

Nowadays some companies are also deducting Gratuity, of course, which is not legal.

The employee's yearly total expenditure will be calculated and will be adjusted in the employee's salary!

Organizations collect Bonus, L.T.A., Medical Allowance every month and will pay after one year to the employee stating that they are favoring the employee!

Example: Employee C.T.C. is Rs.108000/- per year - For one month Rs. 9000/- ,
Basic – Rs. 4800/- , 2PF – Rs. 576 * 2 = 1152/- , Monthly Bonus – Rs. 400/-, Monthly LTA Rs 400/-, Medical Allowance – Rs. 400/- , P.T. – Rs. 200/- etc..

Salary (Which is shown in the salary slip) = CTC – Employer PF = Rs. 8424/-

Net Salary / Salary Payable = Rs. 8424 – Rs. 576 (Employee PF) – Rs. 1200 (Bonus, LTA, Medical Allowance One Month Basic Salary will be divided by 12 – Rs. 4800/12 = Rs. 400 – 3*400 – Rs. 1200) – Rs. 312 (ESIC – Employee + Employer - 6.5% of Basic + HRA) – Rs. 200 (P.T.) = Rs. 6136/-.

Note: Bonus, LTA, and Medical Allowance will be calculated on Basic Salary and will be paid after one year.

With Regards.

Venkatram Rao K

Dear Ramesh,

Salary per month is different from CTC. To calculate CTC, you have to take the annual gross salary of an employee and consider the following emoluments for the year:
a. Bonus (yearly)
b. Gratuity (yearly)
c. Incentives (if any)
d. Employer's share of PF (13.61%) (monthly)
e. Employer's share of ESI (4.75%) (monthly)
f. Uniforms, shoes, Canteen facilities if provided (monthly)
g. Medical Allowance (if applicable)
h. LTA (if applicable)

Regards,
B Saravanan
sarannbala@gmail.com

In our company, full salary is paid as yearly bonus. Will PF and PTax be deducted from the bonus?

Thank you.