Below is How To Calculate CTC In South Africa
The ‘total cost to company’ basis of remuneration (otherwise known as CTC), whilst not a new concept, is taking hold in South Africa.
Initially, only bigger companies used this approach to remunerate staff but over the past 5 years, I have noticed that its use had spread to most companies who operate recognized payroll systems.
The question that is often asked is ‘why is the approach being used and what benefits does it create for both employer and employee?’
In my experience companies invariably convert to this basis of remuneration to gain control of the costs of employment.
In the past employers negotiated salaries with employees and only concentrated on the actual cash benefits payable to employees.
Benefits such as medical aid and retirement fund contributions were not considered.
If you analyze the cost of these benefits you would notice that they make up a significant portion of employees’ total cost of employment.
Benefits therefore must be considered on an equal footing with the cash salary paid to employees. The ‘total cost of employment’ concept is therefore the logical answer to this remuneration issue.
Legislative changes can result in increased costs for employers.
These changes however are seldom accompanied by a decrease in the increases expected by employees annually.
A cost to company approach allows employers to better manage overall employment cost increases.
How do you calculate the total cost to a company in South Africa?
Another common question asked by employers is “how do I determine what an employee’s total cost of employment is?”
The answer is very simple. Add the employee’s cash salary (basic pay plus allowances) to the company’s contributions to the employee’s benefit funds.
How do you calculate CTC?
CTC is calculated by adding salary and additional benefits that an employee receives such as EPF, gratuity, house allowance, food coupons, medical insurance, travel expense, and so on.
CTC in colloquial terms is the cost an employer bears to hire and sustain its employees. Formula: CTC = Gross Salary + Benefits.
How do I calculate my annual income in South Africa?
For example, if an employee earns R10 000 per month in March and April and then R20 000 in May, their YTD income would be R40 000 (10 000 + 10 000 + 20 000) and the annual equivalent in May would be calculated as 40 000 / 3 x 12 = 160 000.
How do you calculate costs to companies in South Africa?
Another common question asked by employers is “how do I determine what an employee’s total cost of employment is?” The answer is very simple.
Add the employee’s cash salary (basic pay plus allowances) to the company’s contributions to the employee’s benefit funds.