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Difference between gross wages and CTC

Gross salary refers to the total salary received by an employee during a particular financial year for his or her contribution to the organization. Not only the basic salary, but also includes incentives and marginal benefits. There are a number of cases where gross salary is misinterpreted with CTC, but there is a fine line between the two.

CTC expands into Cost to Company, it can be understood as the amount that the company spends on an employee during a particular financial year.

Compensation can be described as the remuneration paid by the employer to the employee for the services rendered by him / her to the organization. It plays a crucial role in every employee's life because there are many things that are based on it, such as standard of living, loyalty, productivity, etc. In addition to employees, compensation is also important for employers, as it contributes to the cost of production.

In this regard, here we will explain the difference between gross salary and CTC, for better understanding.

Comparative chart

Basis for comparison Gross salary CTC
Sense Gross salary indicates the aggregate of salary, allowances and additional benefits received by an employee on an annual basis. CTC represents the cost to the company, which implies the overall cost incurred by the company for a given employee, for hiring and support.
Saving contributions Savings of contributions such as the contribution to EPF and ESI not included in the gross salary. Savings contributions such as the contribution to EPF and ESI are included in CTC.

Definition of gross wages

The salary term can be described as the monthly wages received by an employee because of the services he / she provides to the company. Gross salary refers to the actual amount an employee receives before any deductions. the income of an individual in one year while working with the employer.

Gross wages may vary from employee to employee, based on the salary range, the nature of the job, the type of industry, merit and seniority.

The main elements of gross wages are basic wages, incentives, allowances, credits, ancillary benefits, etc. These components can be grouped together as recurring components (which frequently occur as a salary, allowance allowance, rent allowance, transport allowance etc.) and non-recurring components (which occur annually as bonuses, incentives, etc.). Some components are the same for all employees, while some are assigned to only a few employees.

Definition of CTC

CTC the abbreviation for the cost to the company, which connotes the total amount spent by the company to a particular employee, during a particular financial year. In other words, the amount invested by the employer for the recruitment and retention of employee services defined as CTC.

The cost to the company is not equivalent to the basic salary, but the entire remuneration package received by an employee. It is a set of various incentives, allowances, requirements and employer contribution to the Pension Fund (PF) and State Employee Insurance (ESI).

CTC includes all types of direct and indirect benefits, along with savings contributions. The direct benefits include the definitive payment of a certain sum or reimbursement, annual or monthly, which can be basic salary, unemployment benefit, accommodation allowance, medical allowance, transport allowance, incentives, bonuses etc.

Indirect benefits involve the amount paid by the employer on behalf of employees such as meal vouchers, free housing rentals, interest-free loans, company cars, etc. Finally, the savings contribution alludes to the sum invested by the employer on the savings plan, for the benefit of employees such as GRATUITY, Employees Provident Fund, Superannuation Fund.

Key differences between gross wages and CTC

The difference between gross salary and CTC presented in detail below:

  1. Gross salary implies the total salary received by an employee, in a given financial year, which includes basic salary, allowances and additional benefits. At the other extreme, CTC can be defined as the cost incurred by the company for the acquisition of human resources and their long-term maintenance.
  2. The gross salary does not consider the contribution of the employer towards the gratuity, the employee pension fund and the state employee insurance (ESI). Conversely, Cost to Company (CTC) includes the same.

Conclusion

To sum up, it can be said that the difference between these two terms lies in the components covered. At present, most of the company asks candidates for previous CTCs while hiring them, so that they know the overall cost incurred by the company for that employee.