Cost to company

Cost to company

Cost to company (CTC) meaning in salary

"Cost to Company" (CTC) also called as total compensation, refers to the total amount that a company would spend on an employee in a year. It includes every possible monetary expenditure that the company would make on behalf of the employee or because of the employee.

It includes basic salary, allowances, variable pay, benefits, professional tax, Tax Deducted at Source (TDS) and other deductions such as training cost or food allowance.

What are the components of a CTC?

 The CTC is a sum of various components. Here are the typical components of CTC:

Components of CTC

Fixed salary components:

Basic salary

The core monthly salary. This is the fixed component and the base of other allowances.

House rent allowance (HRA)

An allowance given by the employer to the employee to meet the cost of renting a home.

Dearness allowance (DA)

Paid to cushion the impact of inflation. Not all private companies provide DA.

Variable salary components:


This can be a fixed annual bonus or a performance-based bonus.

Special allowance

Any additional allowance given to an employee.

Leave travel allowance (LTA)

Amount given to an employee for travel expenses. In India, LTA is tax-free under certain conditions.

Conveyance allowance

To cover transportation costs that are spent for the company. Example: meeting clients.

Retirement benefits:

Provident fund (PF)

Both the employee and the employer contribute to this fund. The employer's contribution is a part of CTC.


Amount paid by the employer when the employee retires or leaves the job after a certain period.

Other Allowances and Benefits:

Performance-based incentives

Could be monthly, quarterly, or annually, based on performance targets.

Joining Bonus

A one-time bonus given when an employee joins a new company.

Employee Benefits:

Group health insurance

Group health insurance for employees for which the premium is paid by the employer.

Accidental insurance

Group accidental coverage in case of accidents for which the premium is paid by the employer

Term life insurance

Premium paid by the company for policies like group term life insurance.

Car allowance/company Car

For those who require or are given a car for company work.

Meal coupons

Like Sodexo coupons or Pazcard that can be used for buying food.

Gym or club membership

If the company provides them or compensates for them.

Education allowance

For employees pursuing further studies.

Employee Stock Option Plans (ESOPs)

Options given to employees to buy company shares at a discounted price.

Other expenditure:

Shift allowances

For employees working in shifts.

Overtime pay

For any work over the regular working hours.

Relocation allowance

Given when an employee is moved to a new city or country.

Company contributions

Like Superannuation benefits.

Each company might have its unique components based on its policies, industry standards, and job roles. When looking at a CTC offered by a company, it's essential to understand each component's breakdown, as not all components will be part of the monthly take-home pay. Some might be annual, some might be savings, and some might be benefits that aren't directly converted to cash.

Cost to company (CTC) calculation with example

Every company has different CTC calculations. There will be variation within the company as well. 

Let’s understand the common CTC calculation with an example. 

Formula: Gross salary + benefits

CTC vs. gross salary

Gross salary is the total amount of compensation an employee receives before any deductions are made. 

It includes basic salary, allowances (HRA, LTA, DA, etc.), bonus, and variable pay.

CTC is the total amount spent by an employer on an employee and it includes gross salary + benefits.

Gross Salary=Basic Salary+Allowances+Benefits

CTC vs. take home salary

CTC is the total amount spent by the employer whereas take home salary is the amount the employees receive monthly. Take home salary is the net salary after all the deductions (PF, professional tax, TDS etc.) made from the gross salary.

Take-Home Salary = Gross Salary - Deductions.

CTC vs. gross salary vs. take home salary with example

Component Amount (in ₹)
CTC (Cost to Company) ₹12,00,000
Gross Salary Components:
Basic Salary ₹6,00,000
House Rent Allowance (HRA) ₹2,40,000
Special Allowance ₹1,20,000
Performance Bonus ₹60,000
Medical Allowance ₹30,000
Conveyance Allowance ₹24,000
Total Gross Salary ₹10,74,000
Employer's Contributions (included in CTC but not in Gross Salary):
Employer's Provident Fund (EPF) Contribution ₹72,000
Gratuity ₹28,800
Deductions from Gross Salary:
Employee's Provident Fund (EPF) Contribution ₹72,000
Professional Tax ₹2,500
Income Tax (TDS) ₹1,20,000
Total Deductions ₹1,94,500
Take-Home Salary (Net Salary) ₹8,79,500


  • CTC = Gross Salary + Employer's Contributions. In this example: ₹10,74,000 (Gross Salary) + ₹72,000 (EPF by Employer) + ₹28,800 (Gratuity) = ₹12,00,000
  • Take-Home Salary = Gross Salary - Deductions. In this example: ₹10,74,000 (Gross Salary) - ₹1,94,500 (Total Deductions) = ₹8,79,500

Frequently asked questions

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