Understanding Gross Salary vs. CTC: How Are Salary Components Calculated?

Dear All,

Please provide me information on the difference between gross salary and CTC, as well as the percentages of various salary components such as:

- Basic
- HRA
- Medical
- Traveling Allowance
- Special Allowance
- PF
- ESI

I would also like to know if Basic is calculated according to gross salary and if the rest of the components are calculated based on Basic. Is this correct?

Thank you.

As per my knowledge and experience:

CTC = Basic + HRA + Conveyance + DA + Other Allowances + PF (Employer Side) + ESI (Employer Side)

Gross salary = Basic + HRA + Conveyance + DA + Other Allowances

Net Salary (Takeaway) = Gross Salary - Canteen - PF (Employee) - ESI (Employee) - Welfare Fund - Others (Any other deduction as per company policies such as advances, mobile costs, etc.)

Hope this information is helpful.

Hemant Agarwal

Dear Vijeta,

1. CTC: It includes all the payments (as per terms of appointment) which are to be made on a monthly, quarterly, etc. basis. It is the total cost to be incurred by the company as (Basic, HRA, Conveyance Allowance, Education allowance, Special Allowance, etc., or as the monthly salary structure + all the reimbursements such as medical/traveling/entertainment/food coupons, etc., + bonus, gratuity, employer's share of ESI and PF, or any other expenditure on the employee, i.e., free lunch/tea/insurance, etc.

2. Gross Salary: It includes the employer's share of PF/ESI or any other statutory payment.

Dear Vijeta,

There is no fixed percentage. It depends on the company. In our company, we consider five components of Gross Salary:

1. Basic
2. HRA
3. Conveyance Allowance
4. Education Allowance
5. Special Allowance

We calculate Basic as 40% of the gross salary, HRA as 40% of Basic, Conveyance Allowance as a fixed amount of Rs. 800, and Education Allowance as a fixed amount of Rs. 200. The remaining amount after deducting the above four components from the gross salary is allocated to Special Allowance.

Please note that Basic salary should not be lower than the minimum wage rate applicable.

Regards,
BR
Email: rbsohal@gmail.com

Dear Vijeta,

Gross salary includes those items which are part of your salary slip. CTC includes gross salary + PF (Employer) + Medical + LTA + Bonus and any other costs paid by the company for the whole year.

Regards,
Ramesh Pandey

Dear Mr. Vijetha,

CTC stands for Cost to the Company. It involves all sorts of costs that are incurred in procuring an employee. Some part of it is paid to the employee in the form of monthly and annual emoluments. Some part of it is obtained at the end of services like PF, Gratuity, etc.

When it comes to percentages, you already know that the percentage of various components of pay varies from company to company. P. F. contributes to 12% of the basic (employee contribution), whereas the employer's contribution is 13.61%.

Hi Vijetha,

Making it very simple. You have your earnings and deductions in your pay slip. Your earnings are your gross. The company shares a percentage against your employment as below:

- PF 12%
- ESI 4.75% (Gross below 15000)
- Insurance Premium (Gross above 15000)

However, you only pay the PF 12% and ESI 1.75%. Hence, all your earnings/gross plus the company's share comes to CTC.

I hope I am clear.

Regards, Gaurav Vedak

Hi,

The gross salary consists of Basic + HRA + CA, while the CTC includes all your allowances, bonus, PF, reimbursements, and leaves.

CTC means Cost to Company, The cost which is spent totally on the employee. This means ESi and PF (Statutory Deductions), both employee and employer deductions, should be shown in CTC, whether in gross, the employer deductions are a hidden factor.

Basic - 30% - 40% of CTC
HRA - 30% - 60% of Basic
Medical - one basic per annum
Travelling Allowance - depends on company policy, but LTA = one basic per annum... but 6PL need to be availed or deducted
Special Allowance
PF - 12% of basic of employee, 12% of basic of employer (8.33% towards EPS and 3.67% towards EPF)
ESI - not sure but probably 4.71% or 1.61%

Also, I would like to know if Basic is calculated according to gross salary and the rest of all components are calculated according to basic. Is it right? - YES

Dear Vijeta,

CTC, as the name indicates, is the total cost to the company. This includes:

- Basic Pay
- Fixed HRA (Generally 40% of Basic pay but may vary as per company policies)
- Conveyance Allowance (Fixed amount or mileage allowance for actual movement done)
- Education Allowance (Fixed amount)
- Special Allowance, etc.
- All reimbursements such as medical/traveling/entertainment/food subsidies
- Bonus: Minimum 8.33% of Basic Pay. If basic pay is more than Rs 3000/- pm, then the basic for the calculation of Bonus is taken as Rs 3000/-
- Gratuity: Calculated as 50% of monthly pay for the number of years of service put in by the employee subject to continuous service for a minimum period of five years
- Employer share of ESI: 4.75% of basic pay
- Employer share of PF: 13.61% of basic pay (12% for PF cum Pension Fund and 1.61% as admin charges)
- Any other expenditure on the employee, i.e., free lunch/tea/insurance, etc.

Gross Salary: It includes all of the above less perks in kind (-) Employee share of PF 12% of Basic (-) Employee share of ESI i.e., 1.75% of Basic (-) any other deduction by the employer.

Thank you.

Securityexpert