New to HR? Need Help Understanding and Calculating CTC for Employees?

I am a fresher in HR. I recently joined a company. Can anyone guide me on making CTC and provide an explanation?

Understanding CTC in HR

I am happy to assist you with understanding how to structure and calculate CTC (Cost to Company) in HR. CTC typically includes an employee's salary along with additional benefits and allowances provided by the employer. It is essential to consider various components such as basic salary, allowances, bonuses, and deductions like PF (Provident Fund) and taxes to arrive at the total CTC. I can provide you with a detailed explanation and examples to help you navigate this process effectively. Feel free to ask any specific questions you may have regarding CTC, and I will be glad to clarify them for you.

Components of CTC

For creating CTC, you should include salary and other components like Dearness Allowance, Travel Allowance, City Compensatory Allowance, and allowances that are relevant for the employees, their roles, and responsibilities. Then come ESI, PF deductions, Income Tax deduction, etc. For a factory worker, uniform allowance and uniform maintenance allowance are paid. Therefore, unless you provide a complete picture of the company and other details, how can we suggest CTC?

Best wishes

Hello, CTC stands for Cost To Company. As the words suggest, it's the employee's cost to the company, which means payable either in monthly wages/salary or its reimbursed value of perks like conveyance, LTA, phone, or any such cost of facility like bus facility, etc. Statutory contributions made by the employer towards welfare schemes like EPF, ESI, EDLI, premium under Personal Accident policy, Mediclaim, Bonus, gratuity, cost of uniform and shoes, canteen subsidy, like headcounts, are parts and parcels of CTC.

Regards,

RDS Yadav
Director,
Future Institute of Engineering and Management Technology, Bareilly
Labour Law Consultant,
NAVTARANG HR SERVICES
WA-[Phone Number Removed For Privacy-Reasons]

Hi Dear,

As per the new Wage Code, the basic should be 50% of the CTC. Keeping this in mind, you can design the salary structure. According to your company's policy, the structure is to be assigned as different companies follow different salary structures/components. Let's assume you want to design the salary structure for a person who is offered an annual CTC of Rs. 12,00,000/-. Consequently, the monthly CTC will be Rs. 1,00,000/-. Since the basic is to be 50% of the CTC, his monthly basic will be Rs. 50,000/-. HRA is to be 40% for urban areas and 30% for rural areas. If your company has obtained approval from EPFO for the contribution of EPF on the whole basic, then PF will be 12% of the entire basic; otherwise, it will be Rs. 1800/-.

To elaborate, please let me know which components you consider for the purpose of calculating CTC.

Basic: Rs. 50,000/-
HRA: Rs. 15,000/- (Rural/Semi-Urban) or Rs. 20,000/- (Urban)
Other Allowances
Gross Salary is the sum of the above three components
PF: Rs. 1,800/- or Rs. 6,000/-
Gratuity: 4.81% of Basic
etc.