HR & payroll glossary
What is CTC?Cost to Company
CTC is the total annual cost an employer incurs for an employee: gross salary plus employer contributions such as PF, and sometimes gratuity and insurance.
Definition
Cost to Company is the figure most Indian offer letters quote. It is not what the employee receives. It adds the employer's statutory contributions and some benefits to the gross salary, so take-home pay is always lower than CTC ÷ 12.
How it works
- Gross salary = the earnings paid to the employee (basic, HRA, allowances).
- CTC = gross salary + employer PF + other employer-paid items the company chooses to include, such as gratuity provision or insurance.
- Net (take-home) pay = gross salary − employee deductions such as employee PF, ESI, PT and TDS.
Why HR and payroll teams care
Which employer costs sit inside CTC is a policy choice. It must be applied the same way in offers, salary revisions and payroll, or employees see numbers that do not reconcile.
Example
Annual CTC of ₹9,00,000
- Employer PF of ₹36,000 a year (12% of the ₹25,000 ceiling) is included in CTC.
- Gross salary = ₹9,00,000 − ₹36,000 = ₹8,64,000 (₹72,000 a month).
- Take-home is gross minus employee PF, PT and TDS.
CTC in NeevHR
See how NeevHR handles CTC in payroll and HR
A walkthrough on your own policies and pay structures.