Gross Salary refers to the total salary received by an employee during a particular financial year, for his/her contribution to the organisation. It is not just the basic salary but also includes the incentives and fringe benefits. There are a number of instances when gross salary is misconstrued with CTC, but there is a thin line of demarcation amidst the two.
CTC expands to Cost to Company, can be understood as the amount that the company spends on an employee during a particular financial year.
Compensation may be described as the remuneration paid by the employer to the employee for the services rendered by him/her to the organisation. It plays a crucial role in any employee’s life because there are many things which rely on it, like the standard of living, loyalty, productivity, etc. Besides employees, compensation is important for employers too, as it contributes to the cost of production.
In this regard, here we are going to explain the difference between gross salary and CTC, for better understanding.
Content: Gross Salary Vs CTC
|Basis for Comparison||Gross Salary||CTC|
|Meaning||Gross salary means the aggregate of salary, allowances and add-on benefits received by an employee on annual basis.||CTC stands for cost to company, which implies the overall cost incurred by the company on a particular employee, for hiring and sustaining.|
|Saving contributions||Saving contributions like contribution to EPF and ESI are not included in Gross Salary.||Saving contributions like contribution to EPF and ESI are included in CTC.|
Definition of Gross Salary
The term salary can be described as the monthly pay received by an employee on account of the services provided by him/her to the company. Gross Salary refers to the actual amount, that an employee receives, prior to any deductions. It is an individual’s income in one year while he/she is working with the employer.
The gross salary may differ from employee to employee, on the basis of their salary band, nature of job, industry type, merit and seniority.
The major elements of gross salary are basic pay, incentives, allowances, claims, fringe benefits, perquisites, etc. These components can be grouped as recurring components (which frequently occur like salary, dearness allowance, house rent allowance, conveyance allowance, etc.) and non-recurring components (which occur annually like the bonus, incentives, etc.). Some of the components are same for all employees, while some are given to few employees only.
Definition of CTC
CTC is an abbreviation for the cost to company, which connotes the total amount spent by the company on a particular employee, during a particular financial year. In other words, the amount invested by the employer on recruiting and retaining employee’s services is termed as CTC.
The cost to company does not amount to basic salary but is the entire salary package which an employee receives. It is an aggregate of various incentives, allowances, perquisites and employer’s contribution towards Provident Fund (PF) and Employee’s State Insurance (ESI).
CTC includes all types of benefits direct and indirect, along with the saving contributions. Direct benefits encompass the outright payment of certain sum or reimbursement thereof, annually or monthly, which can be basic salary, dearness allowance, house rent allowance, medical allowance, conveyance allowance, incentives, bonus, etc.
Indirect benefits imply the amount paid by the employer on behalf of employees such as food coupons, rent free accommodation, interest-free loans, company car, etc. Lastly, savings contribution alludes to the sum invested by the employer on savings scheme, for the benefit of employees such as Gratuity, Employees Provident Fund, Superannuation Fund.
Key Differences Between Gross Salary and CTC
The difference between gross salary and CTC are presented in detail hereunder:
- Gross salary implies the total salary received by an employee, in a particular financial year, which includes basic pay, allowances and add-on benefits. On the other extreme, CTC can be defined as the cost incurred by the company for acquiring human resources and retaining them for the long term.
- Gross salary does not consider employer’s contribution towards gratuity, Employees Provident Fund and Employee’s State Insurance (ESI). Conversely, Cost to Company (CTC) includes the same.
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 ask previous CTC to the candidates while hiring them, so as to know the overall cost incurred by the company on that employee.