 The total cost that an organization is

spending towards their employee including

the Salary, Perks, Cost related to benefits,
Cost related to hiring, Training, Statutory
Contributions etc.

 the amount the company will likely be

spending on the employee and this could
include anything from training in Bahamas
(which you don’t need) to a Laptop which the
employee might have to return when leaving
the company.
 there could be pay-outs which are one time,
for example, joining bonus, relocation
expenses, amount which will not be coming
to the employee year on year

 CTC - Cost to company is a trick of a

company and HR department, to show we are
paying a big salary, but unfortunately it is
just bubble.
 They overload total expenses of human
resources on salary, and show that they are
paying this much salary to the staff but
actually they pay less and show more.

 For example....your salary is 6.00 Lacs p.a.

Means ... you are getting 50,000/- per
month. But actually person gets only
25,000/- per month...all other money is
deducted for facilities
 Basic

 D.A

HRA

E.A( Educational Allowance)

T.A

L.T.A

Leave Encashment.

 PF subscription of the employer share.

 cost of any housing or other accommodations provided by the employer.

 Cost for Vehicle provided or vehicle allowance.

 ESOP

 overheads/Loans taken by the employer on the employee transfer

 Insurance (Group)

 Super Annuation

 Gratuity

 Medical Insurance

 Bonus

 Incentives

 reimbursement of medical/telephone/petrol
 benefits extended through various schemes like
housing/vehicle/furniture/ A/C/ etc....

 Food Coupons

 Gestation period expenses ( when a employees joins it takes

minimum 2 months to perform to his fullest )

 Place to sit / (because it has some market value)

 Stationary cost

 company's sponsor tours,

 gifts and incentives ( if any )

Basic
DA
HRA
TA
Other Allowance
Mobile Reimbursement / Month

Gross Per Month = Sum of all the above.

Gross Per Annum= 12*Gross/Month

PF Contribution= 12% of Basic/Annum

ESI Contribution = 4.75% of Gross/Annum
 Medical = The mediclaim facility provided to an
employee who are not covered under ESI as the
maximum ceiling for ESI is 10000/Month.

EX-Gratia/Bonus = A fixed amount as Bonus

Annual Fixed Gross Cost= Gross/Annum+ Ex-

gratia

Annual Total Cost = AFGC + PF+ESIC

Annual total cost is also called as CTC.

 Employee 12%

(Basic wages, dearness allowance, cash value of food concession and retaining
allowances if any)

Employer 13.61%

Contribution:

3.67% = Provident Fund (A/c No.1)

8.33% = Pension Fund (A/c No.10)

0.5% = EDLIS -Employees Direct Linked Insurance Scheme (A/c No.21)

Administrative Charges:

1.10% of emoluments = Provident Fund (A/c No.2)

0.01% of emoluments = EDLIS (A/c No.22)


 If gross salary is Less than or equal to
Rs.10,000

 Employers contribution - Gross salary*4.75%

 Employee contribution – Gross salary * 1.75%

 for metro 50% on basic
 for non metro 40% on basic

 Conveyance allowance = 15 or 20% of Basic

 transport allowance can be a fixed amount.

 P.Tax Salary up to 2001 Rs. 16.00
Salary up to 3001 Rs. 25.00
Salary up to 4001 Rs. 35.00
Salary up to 5001 Rs. 45.00
Salary up to 6001 Rs. 60.00
Salary up to 10001 Rs. 80.00
Salary up to 15001 Rs. 100.00
Salary up to 20001 Rs. 150.00
Salary above 20001 Rs. 200.00
◦ LTA TYPE-I (in lieu of LTC Type-I (Home Town):
Reimbursement of 80% of the First class Rail fare for
1250 Kms each way subject to maximum of four full
tickets (Self, Spouse and Children).

◦ LTA TYPE-II (in lieu of LTC Type-II (All India):

Reimbursement of 90% of First class Rail fare for 1500
Kms each way subject to maximum of four full tickets
(Self, Spouse and Children).
 Only Medical Reimbursment which is paid Rs.
15000/- per year is exempt as per IT Act.
(80C of Income Tax)

 Dearness Allowance is calculated based on

Cost of Leaving Index(Shimla points) based
on cost and dearness of commodities
 Gratuity is payable only after 5 years or 60 months

 15 days salary is payable for every completed year.

 So we can say that in 5 years 2 and half months salary is payable

(only basic and DA) or we can say that in 60 months 2.5 months
salary is payable.

 Now calculate how much percentage is 2.5 of 60 as under:

2.5 x 100/60
= 4.16

 hence gratuity is payable @ 4.16% of basic and DA