Understanding CTC: Should Employee PF and ESIC Contributions Be Included and How Does It Benefit Both Sides?

Dear Forum members,

Please guide, is it correct to add/consider employees' PF and ESIC contributions into CTC? If so, how does it benefit the employee and employer?

Thanks

No, PF and ESIC cannot be added to CTC.

Employees' PF & ESIC contributions are deducted from the employee's earnings, which are already considered as part of the CTC. Therefore, any deductions from the employee's earnings - such as PF, ESI, ITAX, PTAX, etc. - should never be included in the CTC.

CTC is a management tool used to understand how much the management is spending on employees at any given point in time.

S K Bandyopadhyay (Howrah, WB)

[Login to view]

There is no concept of CTC in employment laws. It is only an industrial practice, more so to conform to accounting norms as I understand. It is inclusive of expenses incurred by the company on account of employees. Thus, it includes only the employer's part of PF & ESI contributions but not the employee's part thereof.

B. Saikumar
HR & Labour Relations Adviser

Cost to company clearly means that it is the calculation of costs or expenses which the company bears against each employee. It is an attribute for accounting and budgeting for the company and has no relevance towards the labor laws or its compliance.