Understanding CTC Components: What Are the Statutory Parts and Is PF Mandatory?

Hi,

I am preparing a PowerPoint presentation on "how to decide CTC components." Can anyone tell me the statutory components in CTC? Also, is PF mandatory? It's urgent.

Thanks in advance, Gaurav

Dear Gaurav,

Bonus, PF, ESI, Mediclaim, leave encashment, and Gratuity are optional. Most employees will choose to include them in their CTC while some may not consider them.

Regards,
Reshma
India

CtoC in the normal course will have components as detailed below:

Basic Pay - House Rent Allowance (50% of basic) - Other Allowance (20% of basic) - Food and Conveyance allowances (each Rs 800 per month - exempted from Income Tax), all payable every month.

Annual Benefits would include Bonus (20% of the basic), LTA - equal to one month's Basic, Medical Reimbursements (Rs 15,000 per annum - exempted from Income Tax), and PF contributed by the employer (12% of basic).

CTC means Cost to Company. So, a company would include the complete cost it would incur for that person. It would include the PF, Gratuity, Superannuation, Insurance Premium, etc., along with the normal components of salary. However, it is a policy decision of every organization what they want to include in CTC.

CTC refers to Cost to the Company.

CTC ("COST TO COMPANY") is termed as the "Sum of all the rewards and benefits provided to an employee provided from the employer in addition to the salary that has been paid." Thus, CTC is the total cost incurred on an employee by the employer/company. So while calculating the CTC for an employee, the company necessarily needs to include the following:

1. PF
2. ESI (if the Gross Monthly is going to be <= Rs. 10,000)
3. Insurance Cover taken for an employee - Accident Cover, Medical, or Health Insurance Cover
4. Gratuity (it is an active component that is included in the CTC, but an employee is eligible to get this benefit at the time of settlement if they happen to serve in the company for at least five years)
5. Superannuation
6. Monthly Salary Components
7. Annual Benefits like Medical Allowance, Annual Bonus, LTA, etc.

Note: Maternity Benefit for Women and Leave Encashment will not be a part of CTC.

I would like to make a correction in the details given to my friend regarding the PF contribution of the employer in the CTC calculation. In the CTC calculation, we will show the PF contribution of the employer as 13.61%.

Dear Ones,

Hi, I'm looking for the format of off-roll and on-roll employer's letter. Kindly, can anyone help me in this matter?

Thanks & Regards,
SAGAR SHARMA
DEE HR SOLUTIONS

Thank you, everyone, for your valuable time in answering my query. However, I did not get clarification on the statutory components in CTC. I believe the basic salary has to be a part of CTC. I would like to know if HRA, conveyance allowance, and any other component should be a part of CTC.

Gaurav

Hi Gaurav,

Please find the components in CTC:

- Basic
- HRA
- Conveyance Allowance
- Medical Allowance
- Personal Pursuit Allowance
- Spl. Allowance
- PF
- Pro. Tax
- Meal Pass
- ESI

I think I will help you to understand.

Dear Gaurav,

Yes, PF is mandatory if your organization is covered under EPF. Statutory components in CTC may include:

1. Provident Fund
2. ESIC
3. Leave Encashment
4. Gratuity
5. Bonus
6. Insurance Premium

Regards,

Amit Seth.

Hi Gaurav,

CTC consists of Basic, HRA, Child Education Allowance, Special Allowance (Balancing Figure), Medical Reimbursement, Telephone Reimbursement, PF (12% of Basic Employer Contribution), ESIC (Employer Contribution 4.75%), Gratuity (4.81% of Basic, eligibility is after completion of 5 years of service), Meal Voucher payable in the form of Voucher.

Piyush

Dear Gaurav,

The statutory components of CTC are:
1. Provident Fund
2. ESI (Gross salary of Rs. 10,000/- or less)
3. Bonus
4. Gratuity
5. Leave Encashment

Amit has correctly answered your query. However, insurance premium is not a statutory obligation.

Best Wishes,
Vasant Nair
HR Advisor

My name is Nisha, and I have been working as an HR/Admin for the past two years. Can anyone help me understand the salary breakdown? I have been attempting to divide it, but the total sum does not match the Gross salary amount. I kindly request your assistance with this.

Gross Salary: $70,000.00

Basic Salary: $35,000.00 (50% of Gross)
HRA: $17,500.00 (50% of basic)
Conveyance Allowance: $800.00 (fixed $9600 p.a.)
LTA: $2,917.07 (One month's basic pay)
Medical Insurance: $1,250.00 (fixed $15000 p.a.)
Other Allowance: $7,000.00 (20% of basic)

TOTAL: $64,467.07

Dear all,

Prof. Tex will not be a part of CTC. Only 12% of employer PF is a part of CTC.

Regards,
Madan Nayak

Dear Nisha,

Are you sure Rs. 70K is Gross Salary and not CTC? Please let me know the exact CTC, and I will give you the break-up.

Vasant Nair

Dear Brother,

The current practices are different for Staff & workmen.

For Staff:
Monthly basis:
- Basic
- HRA
- Conveyance Allowance
- Special Allowance
- PF

Annual Benefits:
- Medical Reimbursement
- LTA
- Bonus
- Gratuity (Can only be claimed after completion of 5 years of service)

For workmen:
Monthly basis:
- Basic
- HRA
- Conveyance Allowance
- Special Allowance
- Medical Allowance
- Education Allowance
- Washing Allowance
- PF

Annual Benefits:
- LTA
- Bonus
- Gratuity (Can only be claimed after completion of 5 years of service)

Thank you.

I am quite sure that people have taken the wrong way.

Gratuity is never included in CTC. It is a welfare benefit that an employer pays upon successful completion of 5 years or more. Additionally, on the PF part, only 12% is calculated and ESI at 1.75%, but some companies do not include these in the CTC. This is also a part of the welfare benefits, which are mandated by the government.

Please let me know if you need further clarification or have any other questions.

Dear Gaurav,

CTC is like cost to company. So, the company has to make decisions while determining CTC. The components typically include Basic, HRA, Con.allow, OD.allow (if you have field staff), PF, Gratuity, Ex-gratia/bonus, and ESI. Additionally, PT is deducted from the Gross salary of the employee and does not fall under CTC.

The CTC is determined based on the position of the employee, such as Grade-1, Grade-2, Grade-3.

Regards,
Malini.

Dear All,

Thank you for answering my query. It really helped me for the presentation. However, please help me in understanding the compulsory components in CTC. (I believe basic is one of them.)

Thank you in advance.

Gaurav

Hi Nisha,

PF is contributed at 12% of the basic salary from both sides, by the employee as well as the employer. Out of this 12% + 12% = 24%, 8.33% goes to the Pension Fund and the remaining 15.67% goes to the Provident Fund. For the calculation, the maximum limit of Basic is Rs 6500. This means that even if the employee's basic salary is above Rs 6500, the employer is liable to contribute only based on Rs 6500, which is Rs 780. However, if an employee desires, they may voluntarily contribute more than 12%. In addition, the employer also has to pay some administration charges.

A/c No 1: PF contribution Account (12% of employee + 3.67% of employer)
A/c No 2: PF Admin account (1.1% of Basic)
A/c No 10: EPS account (8.33% of basic)
A/c No 21: EDLIS account (0.5% of basic)
A/c No 22: EDLIS admin account (0.01% of basic)

ESIC is contributed from both sides, by the employee and the employer. It is calculated based on the Gross salary per month, with a maximum ceiling of Rs 10,000 per month. The contributions from both sides are as follows:

Employee Side - 1.75% of gross/month
For example, if the gross of an employee is Rs 8000/month, then the ESI contribution would be Rs 8000 * 1.75% = Rs 140.

Employer side - 4.75% of gross/month
For the same gross of Rs 8000/month, the ESI contribution would be Rs 8000 * 4.75% = Rs 380.

Employees are required to fill out a declaration form FORM 1, clearly stating Male or Female. All declaration forms should be countersigned by the employer. Then, a return of declaration in form 3 should be prepared separately for Male & Female within 10 days of filling the declaration form. Subsequently, every employee shall be allotted a temporary identification number.

Regards,
Amit Seth.

CTC COST TO COMPANY - for better understanding of the employee and HR - ADMN
CTC is the term used to denote the overall package an employer is going to offer to an employee. -CTC -cost to company. It is the total cost that an Organization is spending towards their employees which includes Salary details like Basic salary, Employer contribution to Provident fund, Superannuation fund, Gratuity; Bonus like Fixed Bonus, Productivity linked Variable Bonus House Rent Allowance, Company Leased Accommodation, Daily Allowance, City Compensatory Allowance, Special Allowance, Conveyance Allowance, Lunch Allowance, Entertainment Allowance, Books/Periodicals Allowance, Education Allowance, House Maintenance Allowance, Furnishing Allowance, Dress/Uniform Allowance, Other allowances; Benefits/Perks/Reimbursements like Value of company car, Car subsidy (or equivalent tax savings), Driver's salary, Maintenance and Petrol Expenses, Leave Travel Allowance, Canteen Subsidy, Telephone. Expenses, Mobile Phone, Club Membership, Electricity/Gas, Servant/Gardener, Credit Cards, Furnishings/Durables, Holiday facilities, Medical reimbursements, Medical insurance, Personal Accident Scheme, other benefits; Retrials like, Any other performance oriented incentive including Stock Option Plan and; Soft Loans like Interest subsidy, etc) ; (Besides considering Un-bold part in the above CTC definition HR can consider to include leave salary , medi -claim part paid by company , value of company car , interest on loan if given to an employee, stock option if applicable, personal Accident insurance for employee, dress allowance or issuance to employee, Maintenance and petrol expenses (extent of employee portion) , etc to the costs to arrive at actual CTC.)
regards T S NARASIMHAN ED DARCL

CTC COST TO COMPANY - for better understanding of the employee ( Reference ICAI Bulletin

CTC is the term used to denote the overall package an employer is going to offer you. -CTC -cost to company. It is the total cost that an Organization is spending towards their employees which includes Salary details like Basic salary, Employer contribution to Provident fund, Superannuation fund, Gratuity; Bonus like Fixed Bonus, Productivity linked Variable Bonus House Rent Allowance, Company Leased Accommodation, Daily Allowance, City Compensatory Allowance, Special Allowance, Conveyance Allowance, Lunch Allowance, Entertainment Allowance, Books/Periodicals Allowance, Education Allowance, House Maintenance Allowance, Furnishing Allowance, Dress/Uniform Allowance, Other allowances; Benefits/Perks/Reimbursements like Value of company car, Car subsidy (or equivalent tax savings), Driver's salary, Maintenance and Petrol Expenses, Leave Travel Allowance, Canteen Subsidy, Telephone. Expenses, Mobile Phone, Club Membership, Electricity/Gas, Servant/Gardener, Credit Cards, Furnishings/Durables, Holiday facilities, Medical reimbursements, Medical insurance, Personal Accident Scheme, other benefits; Retrials like, Any other performance oriented incentive including Stock Option Plan and; Soft Loans like Interest subsidy, etc) ; (Besides considering Un-bold part in the above CTC definition HR can consider to include leave salary , medi -claim part paid by company , value of company car , interest on loan if given to an employee, stock option if applicable, personal Accident insurance for employee, dress allowance or issuance to employee, Maintenance and petrol expenses (extent of employee portion) , etc to the costs to arrive at actual CTC.)

regards TS NARASIMHAN ED DARCL

Dear Amit,

PF depends on the wage ceiling. If it exceeds Rs. 6500.00, then it will be upon the company to provide PF or not.

Regards,
Ravi