Understanding Employee CTC: Can Someone Explain How to Calculate It?

Dear All,

Could anyone please tell me how to calculate the CTC of an employee?

Regards,
Vishwanath Savula

Dear Vishwanath,

CTC stands for Cost to the Company, i.e., the total expenditure of the company towards a particular employee. It includes every cost in terms of money and materials. Some of the components are:
- Gross Salary
- Bonus
- PF Contribution from the employer's side
- ESI or Medical contribution from the employer's side
- Cell Phone Allowance
- Hard furnishing goods
- Food coupons, etc.

Hope this information helps to solve your query.

Regards,
Amit Seth.

Though this is company-specific, the general rule followed is:

Basic Pay (Base pay + employer's contributions towards retirals: PF, Gratuity, Superannuation Fund) +
Allowances (all cash allowances like Housing, Medical, Conveyance, Education, etc.) +
Performance Pay (fixed or variable bonus, estimated value of ESOP) +
Any other cashable benefit (mobile phones, fuel charges, food coupons, etc.)

Hope this would help.

Cheers,
Sanjeeb

Hi Amit,

Can you send me the standard structure of calculating CTC? What is Adhoc Allowance?

Please guide.

I was questioned by an employee in my organization whether we can get a loan on PF or Gratuity. Just needed to know.

Regards,
Reena D'Silva

Hi Reena,

Yes, it is in practice that one can get a loan over PF fund, but up to how much amount or what's the calculation to do so, that I am not confirmed. Even banks also provide the same, i.e., one can get a loan from banks also over his PF fund.

Regards,
Amit Seth

Hi Sankara, Hi Nisha,

CTC stands for Cost to the Company, i.e., the total expenditure of the company towards a particular employee. It includes every cost in terms of money and materials. Some of the components are:
- Gross Salary
- Bonus
- PF Contribution from the employer's side
- ESI or Medical contribution from the employer's side
- Cell Phone Allowance
- Hard furnishing goods
- Food coupons
- Mobile recharge, etc.

I hope it is clear to you now. If you have any queries, feel free to ask.

Regards,
Amit Seth

Dear Chandan,

CTC is calculated based on the following parameters:

- Gross Salary
- Bonus
- PF Contribution from the employer's side
- ESI or Medical contribution from the Employer's side
- Any Allowances
- Food coupons, etc.
- Canteen facilities
- Gratuity
- All reimbursable allowances

However, it varies from company to company depending on how the management perceives and which parameters they consider while calculating the recruitment budget.

Regards,

Chandan

Hi Sravani and Mamatha,

I have sent the details to your personal email address as specified here. Please check your mail.

Regards,

Amit Seth.

Hi Sandeep,

CTC stands for Cost to the Company, i.e., the total expenditure of the company towards a particular employee. It includes each and every cost in terms of money and materials. Some of the components are:

- Gross Salary
- Bonus
- PF Contribution from the employer
- ESI or Medical contribution from the employer side
- Cell Phone Allowance
- Hard furnishing goods
- Food coupons

I have sent the details to your email as specified. Please check your mail.

Regards,
Amit Seth

Dear Amit,

I have seen your answer to my query, and it's quite obvious. Could you let me know about PT (Professional Tax) calculation and the slab rates? Can I expect a standard format of CTC calculation along with PT? Please email me at vishwanathsavula@hotmail.com.

Thanks & Regards,
Vishwanath Savula

Hi, I have attached a salary breakup for your reference. I've fixed a slab of 30% as the basic of the Total CTC, which is a normal practice and advisable. HRA is 40% in case of non-metro and 50% in case of metro. You can change the basic to more than 30% as per your company's policy. Hope this will solve your problem.

Regards,
Bavani

Hi Reena,

Various types of advances are paid by EPFO. Please refer to http://epfindia.nic.in. Additionally, banks are considering accumulated PF contributions as part of the net worth when sanctioning loans.

Regards,
Prajagopa

Hi Atul,

The PF contribution is paid from the employer's side and not from the employee's salary. However, it is included in the CTC as this is the cost that the company bears towards employment. I hope this clarifies things for you.

Regards,
Amit Seth.

Hi Tom & Liritta,

Check your mail. I have sent the desired document to the email addresses that you specified here.

Regards,
Amit Seth.

How will provident fund be deducted from the salary? Is the employee contribution and employer contribution both deducted from the employee's salary only, or are they different?

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I have corrected the spelling, grammar, and formatting in your text while preserving the original meaning. Let me know if you need further assistance.

Hi Reena,

I hope that you have gathered some information about this. However, to add to your knowledge, there are provisions to take a loan from EPFO for reasons like self-marriage, purchase of a flat/plot, etc. All you have to do is fulfill conditions like a minimum service of 5 years. Eligibility varies depending on factors such as the amount, number of times his salary, etc.

Please visit the EPFO website for more information.

Prabhakara Nambiar

Hi Siva Kumari,

The PF contribution should be 12% from the employer and 12% from the employee's salary. The EPFO has set the upper limit to Rs 6,500/- as the amount for which 12% is to be deducted. However, the amount deducted varies from company to company. Some companies are willing to pay more from their account or have a basic salary of Rs 20,000/-, making the 12% amount to Rs 2,400/-. Therefore, it can be Rs 780/- or Rs 2,400/-. If the company opts for a higher basic salary, the cost to the company increases. For example, the CTC on PF is Rs 28,800/- as opposed to Rs 9,360/- per annum. The employer's 12% contribution towards PF is mandatorily deducted from the employee's salary.

Moreover, if the employee wishes to contribute more to their PF account, that option is also available, with a yearly bonus being accrued. Loans can also be availed on many occasions.

For more information, please visit the EPFO website.

Regards,
Prabhakaran Nambiar

Please find the attachment. It will help you to set the CTC structure for your employees. You may add or remove the heads as per your requirement. Hope it will help you.

Enjoy,
Shashi Kant Upadhyay

Dear Reena,

Regarding the query about loans on Provident Fund (PF) or Gratuity within our organization, I would like to provide some clarification.

As far as I am aware, the Provident Fund organization allows loans to its subscribers after completion of five years. However, there has been a recent amendment where a three-year subscriber may also apply for a loan through PF Form 31.

Concerning gratuity, if your organization has made contributions towards a gratuity fund, partial payments of gratuity are possible, but not in the form of a loan.

Thank you for reaching out.

Best regards,
Dhananjay Singh
dhananjay.simmee@gmail.com

Dear Mr. Vishwanath Ji,

Please see the attachment for making CTC from the gross.

Regards,
PBS Kumar