What does CTC cost

Difference between gross wages and CTC

The gross salary refers to the total salary an employee received in a given fiscal year for their contribution to the organization. It is not just the base salary, but also includes the incentives and fringe benefits. There are a number of cases where gross salary at CTC is misconstrued, but there is a thin line between the two.

CTC extends to Cost to Company and can be understood as the amount that the company spends on an employee in a given fiscal year.

Compensation can be called the remuneration that the employer pays the employee for the services he has provided to the organization. It plays a crucial role in the life of every employee because there are many things that depend on it, such as standard of living, loyalty, productivity, etc. In addition to workers, compensation is also important for employers as it contributes to the cost of production.

In that regard, we will explain the difference between gross wage and CTC here for better understanding.

Comparison table

Basis of comparisonGross salaryCTC
importanceGross salary is the sum of salaries, allowances and benefits that an employee receives annually.CTC stands for Cost for Company, which is the total cost of hiring and maintaining a company for a given employee.
Saving contributionsSavings such as EPF and ESI are not included in the gross salary.Savings contributions such as contributions to EPF and ESI are included in CTC.

Definition of gross salary

The term salary can be described as the monthly wage an employee receives as a result of the services they provide to the company. The gross wage refers to the actual amount that an employee receives before deduction. It is an individual's income in one year while working with the employer.

The gross salary can vary from employee to employee depending on the salary band, type of employment, type of industry, earnings and seniority.

The main components of gross salary are base pay, incentives, allowances, entitlements, fringe benefits, ancillary costs, etc. These components can be grouped as recurring components (which are common such as salary, allowance, home rent, transportation allowance, etc.). ) and one-time components (that occur annually such as bonuses, incentives, etc.). Some components are the same for all employees, while others are only available to a few employees.

Definition of CTC

CTC is an acronym for company cost, which refers to the total amount the company has spent on a given employee in a given fiscal year. In other words, the amount that the employer invests in hiring and retaining employee benefits is known as the CTC.

The cost to the company is not the base salary, but the entire package of salaries that an employee receives. This is a combination of various incentives, remuneration, fringe benefits and the employer's contribution to the Provident Fund (PF) and the State Employee Insurance (ESI).

CTC includes all kinds of benefits, direct and indirect, as well as the savings contributions. Direct benefits include the full or annual reimbursement of a certain amount or reimbursement, which can be made annually or monthly. This can be a base salary, a maintenance allowance, rent for a home, medical allowance, a transport allowance, incentive, bonus, etc.

The indirect benefits are the amount that the employer has paid for the employees, e.g. B. Meal vouchers, rent-free accommodation, interest-free loans, company cars, etc. Finally, the savings contribution relates to the sum that the employer invests in the savings program. Employee benefits such as tips, the Employee Provident Fund, the Superannuation Fund.

Main differences between gross wages and CTC

The difference between gross wages and CTC is detailed below:

  1. The gross wage refers to the total wage that an employee has received in a specific financial year. It includes the basic salary, allowances and additional benefits. On the other hand, CTC can be defined as the costs that the company incurs when it comes to acquiring and retaining human resources in the long term.
  2. The gross salary does not take into account the employer's contribution to the tip, the Employee Provident Fund, and the employee's State Insurance (ESI). Conversely, Cost to Company (CTC) includes the same thing.

Conclusion

In summary, it can be said that the difference between these two terms lies in the components covered. Currently, the majority of the company asks candidates for prior CTC while they are hiring to determine the total cost of the company for that employee.