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Glossary of Human Resources Management and Employee Benefit Terms
Understanding your Cost To Company (CTC) is important for employees for several reasons:
Cost To Company (CTC) is the total amount of money that an employer spends on an employee in a year. This includes the employee's salary or wages, plus the cost of any benefits or perks that the employer provides.
Benefits that may be included in the Cost to Company (CTC) can vary depending on the employer, but they may include the:
Understanding your Cost To Company (CTC) is important for employees for several reasons:
Cost To Company (CTC) is calculated by adding up all the direct and indirect expenses that an employer incurs on an employee in a year.
The formula for calculating CTC is:
CTC = Gross Salary + Employer's Contribution to Provident Fund (PF) + Gratuity + Medical Insurance + Other Statutory Expenses + Other Allowances + Perquisites
Let's break down each component of the CTC formula:
It's important to note that the components of the CTC formula can vary depending on the employer and the country.
To calculate the in-hand salary from the Cost To Company (CTC), you need to subtract the deductions from the CTC.
The formula to calculate the in-hand salary is:
In-Hand Salary = CTC - (Employee Provident Fund Contribution + Professional Tax + Income Tax)
Let's break down each component of the formula:
Variable pay is a type of compensation that is included in some Cost To Company (CTC) packages. Unlike fixed pay, which is a predetermined salary or wage, variable pay can vary based on certain factors such as the employee's performance, company profits, or other metrics.
Variable pay is usually structured as a bonus or incentive payment, which is paid out in addition to the employee's base salary. The amount of variable pay that an employee can earn is typically based on a predetermined formula or percentage, which may vary depending on the company and the employee's role.
These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).
Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.
eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.
The key difference between CTC and in-hand salary is that CTC is the total cost of employing an individual by an employer, while in-hand salary is the actual amount received by the employee after all deductions.
Yes, CTC can vary for different employees in the same role based on factors such as experience, performance, and negotiation skills.
No, companies are not required to disclose CTC to employees, but many do provide this information as part of the employment offer or during annual performance reviews.
Yes, CTC can be a useful tool for comparing job offers from different companies, as it provides a more complete picture of the compensation package than just the salary or wages alone.
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