Arriving at the CTC of an EmployeeCandidate - Costing Elements

Kevin Rahul

Roll No. 14

What is CTC - Cost To Company

O A term which signifies the cost that a company would incur on you as an employee

O The break up of various elements in CTC would talk about the basic salary, HRA (House rent allowance) and other such allowances.

What is Take home pay or in-hand salary

O Take home pay is what you actually receive at the end of month or salary period.

O The in-hand figure is calculated after deducting income tax (TDS) and other deductions as per company policies.

What all is included in a CTC?

Meaning Of Various Components Here

O Direct benefits: They are paid to you monthly and form part of your take home subject to income taxes.

Basic Salary, HRA, D.A, Conveyance Allowance…etc

O Indirect Benefits: These are the benefits that you enjoy without paying for them. Your company takes care of them but add their monetary value to your CTC.

Indirect Benefits Components..O Interest free loans, if any: If your company is providing

you interest free loans for buying a car or a house or any other need.

O They will add the monetary value of the interest benefit that you will get out of NOT paying it, to your CTC.

O Food Coupons / Subsidized meals: Most of the big companies offer free lunch and evening snacks at workplace.

O Do you think these are FREE? No way, you would certainly find them added in yourCTC.

Cont.. O Company Leased Accommodation: This

benefit saves you from the tension of finding a home and negotiating on rent deals.

O Your company provides you with home and pays rent to the landlord directly

O It, will add the monetary value of this benefit to your CTC.

O Medical and Life Insurance premiums paid by company

Cont..O Income tax savings: Sometimes companies

offer you some benefits which are tax free for you but are taxable for them.

O For example, if you receive allowances, they are subjected to FBT (Fringe benefit tax)

O it is paid by your employer and not you. But some companies do add the value of tax that you saved and they paid in your CTC.

Cont..O Office Space Rent: Some companies, if the

company is spending INR 7000 per month on the cubicle that you would sit in, they would add the yearly cost of this in your CTC.

O This means that INR 84,000 (12*7000) will form part of your pay package even though you will never get it!!

3. Saving Contributions:

O They are contributions made to your long term savings account by your employer.

O They do not form part of your monthly take home but belong to you and you may or may not get them in long term.

O Superannuation Benefits: These are long term pension type schemes mostly offered bymultinational companies.

O A predefined amount is contributed every month in your superannuationaccount and you can withdraw it after you retire or leave the organization

Cont..O Employer Provident fund Contribution: This

forms part of your CTC and your employer contributes about 12% of basic salary every month.

O This amount keeps accumulating in your PF account and you can withdraw it at the time of leaving the company

O Gratuity: Again, forms part of your CTC but is added to your gratuity account annually.

O This has a time limit of 5 years attached to it. O If you leave the company anytime before 5 years,

you will NOT get anything from your earlier year's accumulation of this amount

So, as a general rule, the CTC and take home pay can be defined as:

O CTC = Direct benefits + Indirect benefits + Saving Contributions

O Take Home pay = Direct Benefits - Income tax - Employee PF - Other deductions, if any

THANK YOU.