Not many people may understand the cost-to-company (CTC) emoluments package that companies offer to their prospective employees, but to understand the CTC package is to be sure what the company is offering the employee in terms of take-home pay and the gross emoluments that constitutes the CTC.
Now, to understand what the employee will get and what he/she will not get in the take home pay, we need to look at the difference between the monthly salary component and the CTC components. In other words, we need to look at the components that constitute the CTC.
But before we look at the CTC components, we need to look at the salary structure that may be the take home pay for the employee. The salary components may include basic salary, dearness allowance, house rent allowance, conveyance allowance, magazine allowance, entertainment allowance, among others. The basic salary and allowances that are paid by the company to the employee on a monthly basis constitute the take-home pay (minus the employee's contribution to provident fund, professional and other taxes, etc.). These expenses incurred by the company are fixed for a period of one year or till the time of revision of pay.
However, as stated earlier, CTC means cost-to-company, which means it is the cost incurred by the company on the employee. Apart from salary, the company may incur many other expenses on the employee as part of its contractual obligation as per the terms of employment. These expenses could include medical reimbursement (up to a pre-specified annual limit), contribution to provident fund, gratuity, annual bonus, performance bonus, group insurance (medical or life), cost of professional training, interest subsidy on loans, food subsidy, among others.
From the above, it is evident that the CTC pay structure offered by the company may look attractive, but the take-home pay might be substantially lower.
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