COST TO COMPANY

Presented By:Priyanka Sadaf Fatima Khan MBA (HRM) V Trimester

Concept of CTC
CTC is the amount that the company spends directly or indirectly because of employing you.
It is the money given to you (your in-hand component), plus the money spent because of you.

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 For the Company- Cost to company is a term which essentially implies the amount of expenses the company will spend on an employee in a particular year. For employees- Cost to company is an amount projected by the company as salary but is never what is actually received by the employee in cash.

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Components of CTC
Basic Dearness Allowance (DA) Incentives or bonuses Conveyance allowance House Rent Allowance (HRA) Medical allowance Leave Travel Allowance or Concession (LTA / LTC) Vehicle Allowance Telephone / Mobile Phone Allowance Special Allowance
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Example of CTC
Say your basic is Rs. 15,000 per month, DA is Rs. 10,000 per month, you get conveyance allowance of Rs. 800 per month, and you get HRA of Rs. 4,500 per month. So, your package so far is Rs. 3,63,600 per year.

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Companys contribution to Provident Fund (PF)

It is mandatory for you to contribute 12% of your basic towards provident fund (PF). Your employer makes an equal contribution (12% of your basic) to your PF account. Although this amount is not given out to you every month, for your company, it is an expense that it incurs on you every month. Therefore, this forms a part of your CTC pay.
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EXAMPLE
12% of your basic is Rs. 1,800 per month. That is, Rs. 21,600 per annum. Your CTC package becomes Rs. 3,85,200.

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Reimbursements
Various reimbursements that you get from your company can also form a part of your CTC package, like: Medical bills Phone bills Magazine subscriptions Book purchases, etc.

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Example
You get reimbursement of medical bills of upto Rs. 15,000. So, your CTC package becomes Rs. 4,00,200.

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Life Insurance and Health Insurance

Most employers provide free health insurance cover to their employees and their dependents. Some companies also provide life insurance for their employees free of cost. The premium amounts paid for such insurance on your behalf can be included in your CTC salary.

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Example
Say you get a health insurance cover of Rs. 1 Lakh for yourself and your family. The premium for this is Rs. 2,000. Thus, your CTC package becomes Rs. 4, 02,200.

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Medical Facilities
Many companies have in-house health centers, hospitals or other health care facilities where medical care is provided free of cost to employees. Companies work out a per-employee cost for such facilities, and can include that in your CTC pay package.

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Subsidized Meals
Many companies run canteens or cafeterias for their employees, which provide subsidized meals to the employees. Such subsidy can be included in your cost to company package.

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Example
Lets say your company provides you lunch for Rs. 10, and the actual cost of that lunch is Rs. 25. Thus, there is a subsidy of Rs. 15 per meal. For 21 working days in a month, this is Rs. 315. Or, Rs. 3,780 per year. Thus, your CTC package becomes Rs. 4,05,980.

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Taking it too far

Some companies take the concept of costto-company too far. Office phone bill The bill for the office phone that you use can be included in your CTC salary too. Office space rent There are many companies especially large investment banks that include your office space rent in your CTC package
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Example
Lets say your office is in Mumbai. Your have a small cubicle, say 6 feet by 8 feet (48 square feet). Lets say the going rate for rent for office space in that area is Rs. 200 per sq. ft. per month. What is the cost of your cubicle in that case? Its Rs. 200 * 48 = Rs. 9,600 per month, or Rs. 1,15,200 per year. When this is included in your CTC, your overall CTC package becomes Rs. 5,21,180!
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Remember This!!!!
When you read about the whopping, exorbitant salaries paid out to fresh management graduates (Like the IIM Ahmedabad MBAs)! Their large salaries might include the office space rent as well!!

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Conclusion What may be an expense for the company need not necessarily be salary for the employee!!!

ANY QUESTIONS ????

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