Employee Cost Calculator – India [2026]
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The salary you offer is not what the employee costs you. In India, the real figure, the cost to company, or CTC includes EPF, ESI, gratuity, bonus and professional tax on top of gross pay. This calculator shows the full number before you hire.
Enter a salary and you'll see the total employer cost (CTC), what the employee takes home, and where every rupee goes. Below the tool, we break down each component with current 2026 figures, a worked example in rupees, and the costs most calculators miss.
What does CTC mean? (CTC full form and meaning)
CTC stands for Cost to Company. It is the total annual amount an employer spends on an employee - in other words, the cost of an employee includes gross salary plus every statutory and benefit cost the company bears, such as the employer's EPF and ESI contributions, gratuity accrual and bonus. CTC is always higher than both gross salary and take-home (in-hand) pay.
The simple way to read it:
CTC = gross salary + employer statutory contributions + benefits.
Here, base salary is the starting gross-pay component before deductions, with employer-side taxes and benefits added on top.
Take-home pay is lower still, because the employee's own EPF, professional tax and income tax (TDS) are deducted from their share. In India, CTC typically runs 10–15% above gross salary on statutory minimums, which helps show the total cost of hiring versus what appears as gross or in-hand pay.
What is an employee cost calculator for India?
An employee cost calculator for India works out the true cost to company of a hire, not just the salary, but every mandatory employer contribution on top. It's also called a CTC calculator, a cost-to-company calculator, a true-cost-of-employee calculator, or a free employee cost calculator.
It matters because the gross salary is only part of the bill. Indian employers must contribute to EPF and (for lower-wage staff) ESI, accrue gratuity, pay statutory bonus where it applies, and handle professional tax, with payroll taxes as a common international benchmarking term for these added employer-side costs. A good calculator helps calculate the full employer outlay from salary inputs, so you can budget a hire and compare offers accurately. It also gives a breakdown of the full CTC, not just base pay.
What's included in employee cost in India (2026)
Every Indian employer pays a set of statutory costs on top of gross salary. Here's each one with current 2026 figures.
Employee Provident Fund (EPF)
Employers contribute 12% of basic wages to EPF, matching the employee's 12%. From 17 September 2026, the wage ceiling rose from ₹15,000 to ₹25,000 a month, so the maximum employer EPF contribution is now ₹3,000/month (12% of ₹25,000), up from ₹1,800. Including EDLI (0.5%) and administrative charges (0.5%), the true employer outgo is about ₹3,250/month per employee. EPF is mandatory for establishments with 20 or more employees.
Note the 2026 "wages" rule: if salary components excluded from PF wages exceed 50% of total pay, the excess is added back so high-allowance structures can no longer keep PF artificially low.
Employee State Insurance (ESI)
ESI applies to employees earning ₹21,000/month gross or less, in establishments with 10+ employees, and these costs vary by wage level and applicability threshold. The employer contributes 3.25% of gross and the employee 0.75%. For staff above the ₹21,000 threshold, ESI doesn't apply which is why ESI affects junior and support roles far more than senior hires.
Gratuity
Gratuity is a lump sum payable after 5 years of service, but it accrues as a cost from day one. Employers typically provision 4.81% of basic salary each month toward it. The payout formula is (Basic × Years of service × 15) ÷ 26. It's a real CTC component even though it's paid years later.
Statutory bonus
Under the Payment of Bonus Act, employees earning up to ₹21,000/month are entitled to a statutory bonus of 8.33% to 20% of eligible wages, paid annually. For roles within the threshold, factor this into CTC - many calculators omit it.
Professional tax
Professional tax is a state levy, so it varies and is usually estimated on the assumption that employer and employee are in the same state: typically ₹150–₹200/month, capped at ₹2,500 a year. States like Maharashtra, Karnataka and West Bengal levy it; others (e.g. Delhi, Haryana) don't. It's small, but it belongs in an accurate CTC.
Income tax (TDS)
Income tax is deducted from the employee's salary (TDS), not an employer cost, but the employer calculates and remits it. It reduces take-home pay, not CTC. Worth noting so the gross-vs-CTC-vs-in-hand distinction stays clear for the reader.
How to calculate employee cost in India, step by step
Start with annual salary and convert it to the gross monthly equivalent, then split it into basic and allowances (basic is usually 40–50% of gross).
Add employer EPF - 12% of basic, capped at the ₹25,000 wage ceiling, so a maximum of ₹3,000/month (about ₹3,250 with admin and EDLI), as these contributions are employer paid on top of salary.
Add employer ESI - 3.25% of gross, but only if gross is ₹21,000/month or less.
Add gratuity accrual - 4.81% of basic.
Add statutory bonus where the employee earns ≤ ₹21,000 (8.33%–20% of eligible wages).
Sum these on top of gross to get the total cost to the employer for the month (CTC). Professional tax and income tax are employee-side deductions, while taxes and benefits-related employer costs sit on top of gross, so they do not reduce CTC.
Worked examples: what a hire actually costs
The burden rate isn't flat, it's higher for junior staff (ESI and bonus apply, EPF is on full basic) and lower for senior staff (EPF caps out, ESI and bonus don't apply), depending on wage level and seniority. Two examples show the range.
Junior employee - ₹20,000/month gross (basic ₹10,000):
Component | Calculation | Monthly cost |
|---|---|---|
Gross salary | — | ₹20,000 |
Employer EPF (incl. admin) | 12% of ₹10,000 + 1% | ₹1,300 |
Employer ESI | 3.25% of ₹20,000 | ₹650 |
Gratuity accrual | 4.81% of ₹10,000 | ₹481 |
Statutory bonus (provision) | 8.33% on ₹7,000 | ₹583 |
Total employer cost (CTC) | — | ₹23,014 |
That's about 15% above gross because ESI and bonus both apply at this wage level, which is why an employee's true cost sits meaningfully above salary alone.
Senior employee - ₹1,00,000/month gross (basic ₹50,000):
Component | Calculation | Monthly cost |
|---|---|---|
Gross salary | — | ₹1,00,000 |
Employer EPF (incl. admin) | capped at ₹25,000 ceiling + 1% | ₹3,250 |
Employer ESI | not applicable (gross > ₹21,000) | ₹0 |
Gratuity accrual | 4.81% of ₹50,000 | ₹2,405 |
Total employer cost (CTC) | — | ₹1,05,655 |
That's about 5.7% above gross, the EPF cap and the ESI/bonus thresholds mean senior hires carry a much lower statutory burden. This is the nuance most calculators get wrong by quoting a flat percentage, especially when comparing the cost of employing senior hires versus junior hires.
LPA to monthly salary: quick reference
A common question: what does an annual CTC in lakhs work out to per month? Here's the monthly CTC and an approximate in-hand figure (in-hand varies with your salary structure and tax).
Annual CTC | Monthly CTC | Approx. in-hand/month |
|---|---|---|
₹2 LPA | ₹16,667 | ~₹15,000 |
₹3 LPA | ₹25,000 | ~₹22,000 |
₹5 LPA | ₹41,667 | ~₹35,000–37,000 |
₹8 LPA | ₹66,667 | ~₹54,000–57,000 |
₹12 LPA | ₹1,00,000 | ~₹78,000–83,000 |
In-hand is lower than monthly CTC because the employee's own EPF, professional tax and income tax (TDS) are deducted. If you want to turn LPA into a practical planning figure, use the calculator above for a precise figure.
10 Best EOR Companies in India [2026]
Hidden costs beyond statutory CTC
Statutory contributions are only the mandatory layer, and a fully loaded cost also includes additional expenses. A fully loaded cost also includes expenses such as recruitment and placement fees, onboarding and equipment, health insurance (often ₹10,000–₹25,000 per employee a year), training, and payroll and compliance admin. For a true first-year budget, plan above the statutory CTC, especially for roles you recruit through an agency, to your business.
Employee cost in India vs UK and Germany
For companies choosing where to build a team, India's statutory employer burden is low by global standards, but the totals in any employee cost calculator also depend on the market being evaluated. A rough comparison of mandatory employer on-costs above gross salary:
Market | Typical employer on-cost above gross | Main statutory components |
|---|---|---|
India | ~6–15% (lower for senior, higher for junior) | EPF, ESI, gratuity, bonus |
United Kingdom | ~15–20% | Employer NIC (15%), pension (3%) |
Germany | ~20–22% | Social security (pension, health, unemployment, care) |
The lower statutory load is one reason India is a leading destination for global teams — though salary, talent depth and compliance all factor into the real decision, and employers should also focus on the hiring priorities that matter most.
Hiring in India: EOR vs setting up an entity
For a company based outside India — in the UK, Europe or the US — employing someone in India raises one structural question: set up an Indian entity, or hire through an Employer of Record? Both are valid; if you’re deciding between entity setup and EOR, the right answer depends on headcount and timeline.
Factor | EOR (PamGro) | Indian entity |
|---|---|---|
Time to first hire | A few business days | 2–4 months (incorporation, PF/ESI/PT registrations, bank setup) |
Setup cost | None | Incorporation, legal and compliance fees |
Ongoing compliance | Managed by PamGro | Your responsibility — PF, ESI, PT, TDS, gratuity, filings |
Minimum headcount | 1 employee | Economical from a larger team |
Permanent establishment risk | Low — the EOR is the legal employer | Needs careful tax structuring |
Best for | Testing India, speed, small teams | Large, long-term India operations |
For most companies hiring their first few people in India, an EOR is faster and cheaper once you count the registrations and ongoing compliance you need to account for, to help you choose the right hiring structure.
Hiring into India from the UK or Europe? How PamGro helps
PamGro specialises in the UK/Europe→India hiring corridor. We can make your India hiring setup faster and clearer. We become the legal employer for your Indian hires, so you onboard in days without an Indian entity, with the compliance support and flat fee structure needed to manage EPF, ESI, gratuity, professional tax, TDS and full statutory obligations.
The cost you model here is the cost you pay, with no hidden registration or offboarding charges. You hire and set the salary; we handle India's statutory complexity in a way that can help you plan confidently. [Speak to an expert] to access our free consultation and a calculator to model structure-specific CTC for your next India hire.
Hire Employees in India with an Employer of Record [Guide]
Onboard and pay top employees and contractors in India, without worrying about entities or compliance.
FAQ
What is the full form of CTC?
CTC stands for Cost to Company. It is the total amount an employer spends on an employee in a year — gross salary plus the employer's statutory contributions (EPF, ESI, gratuity, bonus) and any benefits. CTC is always higher than take-home pay, because the employee's own EPF, professional tax and income tax are deducted from their share. In India, CTC is typically 6–15% above gross salary.
What is the difference between CTC and take-home salary in India?
CTC is what the employer pays in total — gross salary plus employer contributions like EPF, gratuity and bonus. Take-home (in-hand) salary is what reaches the employee after their own EPF contribution, professional tax and income tax (TDS) are deducted. Take-home is always lower than gross, which is lower than CTC. The gap depends on your salary structure.
How much does it cost to hire an employee in India?
The true cost (CTC) is typically 6–15% above gross salary, depending on benefits and statutory contributions. For junior roles (gross ≤ ₹21,000), ESI and statutory bonus push the employer burden toward 15%. For senior roles, EPF caps out at the ₹25,000 wage ceiling and ESI/bonus don't apply, so the burden falls to around 6–7%. Add recruitment, equipment and benefits for a full first-year budget.
How do I calculate salary plus statutory costs for hiring in India?
Start with gross salary and split out basic (usually 40–50%) to know the full employer cost. Add employer EPF (12% of basic, capped at the ₹25,000 ceiling), ESI (3.25% of gross if gross ≤ ₹21,000), gratuity accrual (4.81% of basic), and statutory bonus where it applies. Sum these and other required costs on top of gross for total employer cost. The calculator on this page does it instantly for your business.
What is the employer EPF contribution in India in 2026?
Employers contribute 12% of basic wages to EPF. From 17 September 2026, the wage ceiling rose from ₹15,000 to ₹25,000 a month, so the maximum employer EPF contribution is now ₹3,000 a month — about ₹3,250 including EDLI and administrative charges. EPF is mandatory for establishments with 20 or more employees.
How do I account for provident fund and gratuity costs when hiring in India?
Provident fund (EPF) is an ongoing monthly cost — 12% of basic, up to ₹3,000/month at the 2026 ceiling. Gratuity is paid after five years but accrues from day one, so provision about 4.81% of basic each month. Both belong in CTC even though gratuity is paid later. An EOR like PamGro manages and provisions both for you.
Is gratuity included in CTC in India?
Yes. Although gratuity is only paid after five years of continuous service, employers provision for it monthly — about 4.81% of basic salary — and include it in CTC. The payout is calculated as (Basic × Years of service × 15) ÷ 26. Because it accrues from day one, it's a genuine cost of employment, not just a future liability.
What is ESIC and who does it apply to?
ESIC (Employee State Insurance) provides medical and cash benefits to lower-wage workers. It applies to employees earning ₹21,000 a month gross or less, in establishments with 10 or more employees. The employer contributes 3.25% of gross and the employee 0.75%. Employees earning above ₹21,000 are outside ESI, so it mainly affects junior and support roles.
How much does it cost to hire a software engineer in India in 2026?
It depends on seniority. A mid-level engineer on ₹12 LPA (₹1,00,000/month gross) has a true CTC of around ₹1,05,000–₹1,06,000/month — roughly 6% above gross, because EPF caps out and ESI/bonus don't apply at that level. Add recruitment and equipment for the full first-year cost. Use the calculator above for a precise figure by salary and structure.