Dear friends participating in this discussion,
Why is there such hype about CTC?
Why is there such hype about CTC as if it is going to create tangible and intangible advantages for both labor and management in the realm of compensation management?
CTC is nothing more than an accounting expression of the total annual cost incurred by the company per employee, inclusive of wages/salary and fringe benefits. It is particularly used by some Asian Transnational Corporations to entice employees with their compensation packages.
In short, CTC equals Direct benefits + Indirect benefits + Savings. Direct benefits include basic salary, dearness allowance, HRA, medical allowance, LTA, CCA, conveyance allowance, incentives, bonus, etc. Indirect benefits encompass interest-free loans, food coupons or subsidized meals, medical insurance premiums paid by the employer, company-paid accommodation, and the like, while "Savings" denote statutory contributions paid by the employer to EPF and Gratuity Fund, and other superannuation benefits payable under the contract of employment.
Differentiating CTC from Gross Salary
Therefore, it is essential to differentiate CTC from 'Gross Salary,' which simply indicates the total salary before deductions. The mentioned Indirect Benefits are not paid in cash to the employee. Similarly, the accumulations of EPF and Gratuity are only payable upon termination of employment, with gratuity being solely the employer's statutory liability subject to specific conditions and ceilings.
By critically analyzing the concept of CTC, one can discern that it is not a novel concept in salary and wage administration but rather an age-old practice with a trendy name. Presenting the compensation package in terms of CTC in recruitment advertisements and offer letters simply enhances the offer's attractiveness, as CTC can vary over time with service.