Understanding CTC: How Do Companies Really Calculate Cost to Company and What Should Employees Know?

kumaracme
Dear all members,

Understanding CTC (Cost to Company)

Nowadays, most companies offer their packages in the form of CTC (cost to company). Is there any guideline to compute CTC? I mean, which payments to an employee should be included while computing CTC? It is also informative to add that all companies calculate this differently; some even include all reimbursements like conveyance expenses, etc. Moreover, some companies include the FBT paid by the company on the employee's expenses.

Employee Perspective on CTC

Looking at it from the employee's perspective, in some instances, they receive only 50-60% of their monthly CTC in hand, which was initially assured at the time of recruitment.

All members are requested to post their views and guidance.
nanu1953
Mr. X has been offered a position by a reputable MNC with the following compensation package:

Basic Salary and Benefits

Basic: ₹60,000 per month
HRA: ₹30,000 per month
Monthly Gross: ₹90,000 per month
Retirement Benefits:
- PF: ₹7,200 per month
- Superannuation Benefit: ₹9,000 per month
Premium for Differential Insurance: ₹1,000 per month
Annual Ex Gratia: ₹60,000 per year (i.e., ₹5,000 per month)
LTA: ₹1,20,000 per year (i.e., ₹10,000 per month)
Company Car for Office Commute: ₹12,000 per month
Canteen Subsidy: ₹2,600 per month

Total Compensation Breakdown

Total Cash Component: ₹1,05,000 per month
Retirement Benefit: ₹16,200 per month
Insurance: ₹1,000 per month
Company Car and Canteen: ₹14,600 per month
CTC: ₹1,36,800 per month
Yearly CTC: ₹16,41,600

The above is a classic example of CTC. It varies from organization to organization as there is no legal standard. However, organizations are required to assess the cost of each employee for budgeting, internal control, etc.

Regards,
S K Bandyopadhyay (WB, HOWRAH)
CEO - USD HR Solutions
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USD HR Solutions – To Strive towards excellence with effort and integrity
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