Understanding CTC: Why Do Employers Ask for It and What Does It Include?

Dear all,

I have been asked to provide the current CTC in a company. Could you please clarify what CTC means and what it includes? Additionally, is a new employer more inclined towards a higher or lower CTC? Why would they inquire about that instead of the gross package or take-home salary?

Thank you.

CTC stands for Cost to Company, and it always refers to the annual package. CTC represents the gross amount that the company provides, which includes PF, Gratuity, and other deductions. It's important to note that CTC does not reflect the actual salary received in hand.

I hope this helps clarify the concept of CTC. If you have any further questions, feel free to ask.

Hi Raj,

The contents of the salary break-up are as follows. You can prepare it according to your convenience. HRA would be 50% or 60% of the basic salary.

- Basic
- HRA
- TA
- Other Allowance
- Mobile Reimbursement per Month
- Gross Per Month = Sum of all the above
- Gross Per Annum = 12 * Gross/Month
- PF Contribution = 12% of Basic/Annum
- ESI Contribution = 4.75% of Gross/Annum
- Medical = The mediclaim facility provided to employees not covered under ESI, as the maximum ceiling for ESI is 10,000/Month. Any amount exceeding this will be covered under Mediclaim or depending on the company policy.
- Ex-Gratia/Bonus = A fixed amount as a bonus
- Annual Fixed Gross Cost = Gross/Annum + Ex-gratia
- Annual Total Cost = AFGC + PF + ESIC
- Annual total cost is also referred to as CTC.

I hope this clarifies everything for you. If you have any queries, feel free to ask.

Regards,
Amit Seth

Thank you, Mithun.

By the way, the company I am working for does not provide Gratuity, PF, etc., but does cover expenses for food, accommodation, and TA charges. Would these be included in CTC? What is the typical CTC for an entry-level professional in the manufacturing industry?

It really depends; I would say that it's always better to talk to your HR and your finance department. They will give you the best information.

Dear Amit and Mithun,

I need clarification. I was working outside India and I was paid only the basic salary + bonus. Food and accommodation were provided free of cost. Except for this, there is no PF, ESI, or other allowances. I also don't have a proper salary slip. In this case, how should I calculate my CTC?

Thanks.

Hi Raj,

When providing your CTC, you may clarify that your CTC includes accommodations as well as food expenses. However, you must provide some relevant proof of the same as it may be asked by the interviewer.

Regards,

Amit Seth

Hi Rajkumar_Victor,

I may perhaps be able to simplify it further.

CTC is an abbreviated form of 'Cost to the Company'. It means the total of all that the Company is spending on you. But 'Gross' is the total salary and benefits that you draw from a Company.

Companies over the years adopted the CTC concept so that they could compute the total money spent on an employee. So, CTC includes every expense (basic salary + allowances and non-official reimbursements) on you that you can imagine (except, of course, official expenses).

To calculate your CTC for your job abroad, you need to add your basic (i.e. base pay) and (fixed) bonus first. Then you have to calculate a money value for the accommodation, meals provided by the Company. (Think practically what you would have paid for the same accommodation and food if you had to pay for it) Add all these, and you will arrive at your CTC value.

Rahul
09968270580

Thanks, Mr. Amit and Mr. Rahul.

In short, I have calculated my CTC as follows:
CTC = Basic + Bonus + Food + Accommodation + Other expenses (like flight charges, training expenses, etc).

Now I got a clear idea. :)

Sir,

I believe ESI Contribution is 1.75% of Gross/Annum, while 4.75% is the Employer contribution. Am I correct?

I worked in one of the premium institutes, a sister concern. They gave me my offer letters forwarded to my mail ID. The salary used to be usually on different days every month with no clear breakup.

I NEED TO KNOW WHETHER the company is MISUSING myself and other persons working under me because WE used to report to Delhi and we are located in the south.

Please reply.