CTC is not what an employee costs you. Add employer PF, EDLI, PF administrative charges, ESI, gratuity provision, statutory bonus, Labour Welfare Fund, overheads and the cost of the hire itself, then see the number that actually matters: cost per productive hour.
This calculator adds up what an employee really costs a business in India. True annual cost = CTC + statutory costs outside CTC (EDLI, PF admin charges, Labour Welfare Fund) + recurring overheads + one-time hiring costs divided by expected tenure. Cost per productive hour = that total divided by (working days minus leave) x hours per day.
Sample values shown (₹12 lakh CTC, 3-year tenure). Change them to cost your own role.
| Component | Per month (Rs) | Per year (Rs) |
|---|
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An offer letter is a communication document, not a cost sheet. It is built to look attractive to the candidate, so it bundles some employer obligations into the headline figure and quietly leaves others out. If you budget headcount off CTC alone, you will under provision once overheads and hiring costs are counted. With the sample inputs above the gap is shown in the result; your figure depends on your overheads and hiring spend.
Three separate layers sit between the CTC on the letter and the money that leaves your bank account:
| Item | Employer rate | Base |
|---|---|---|
| EPF (includes EPS) | 12 percent | Basic plus DA, capped at Rs 25,000 per month under the statutory wage ceiling (raised from Rs 15,000 on 17 September 2026) |
| EPS carve out | 8.33 percent | Capped at Rs 25,000, so about Rs 2,083 per month maximum. This comes out of the 12 percent, it is not extra. |
| EDLI insurance | 0.5 percent | Capped at Rs 25,000, so Rs 125 per month maximum. Employer only. |
| EPF administrative charges | 0.5 percent | PF wages, with a Rs 500 per month floor at establishment level |
| ESI | 3.25 percent | Gross wages, where gross is Rs 21,000 or less per month (Rs 25,000 for employees with disability) |
| Gratuity provision | 4.81 percent | Basic plus DA. This is the costing convention derived from 15 divided by 26, divided by 12. |
| Statutory bonus | 8.33 percent minimum, 20 percent maximum | Rs 7,000 per month or the state minimum wage, whichever is higher. Eligibility if wages are Rs 21,000 or less a month (S.O. 4710(E), 25 August 2026, under the Code on Wages). |
| Labour Welfare Fund | State specific flat amount | Per employee. Maharashtra Rs 75 per half year, Karnataka Rs 100 per year. Many states do not levy it at all. |
The statutory obligation is 12 percent of basic plus DA capped at the wage ceiling. The Cabinet raised that ceiling from Rs 15,000 to Rs 25,000 a month, notified by S.O. 5109(E) and effective from 17 September 2026, so the capped employer PF is now Rs 3,000 a month instead of Rs 1,800. Many employers voluntarily contribute on full basic instead, which is permitted and often used as a retention lever, but it is a choice with a real cost. On a basic of Rs 50,000 per month, contributing on full basic costs Rs 6,000 instead of Rs 3,000, a difference of Rs 36,000 per year per employee. The EPS carve out stays pegged to the ceiling regardless, so the extra money all flows into EPF.
The higher ceiling also brings employees earning between Rs 15,000 and Rs 25,000 a month into mandatory EPF coverage, so budgets for those roles need the full 12 percent employer share (plus EDLI and admin charges) from September 2026 payroll.
The Code on Wages has been in force since 21 November 2025. Under it, basic plus DA plus retaining allowance must be at least 50 percent of total remuneration. Where excluded allowances run above 50 percent, the excess is added back into wages for statutory purposes, which lifts the PF, gratuity and bonus base whether or not you restructure the payslip. The size of the increase depends on how allowance heavy the existing structure is; the new wage code salary calculator shows it for a given structure.
If you set basic below 50 percent in the calculator, treat the result as a floor rather than a settled number, and the tool will say so.
Recruitment, equipment and onboarding are paid once but belong to the whole employment relationship. Dividing them by expected tenure gives an honest annual figure. This is where attrition shows up in rupees: a role that costs Rs 1.35 lakh to fill and equip carries Rs 45,000 a year at three year tenure, but Rs 1.35 lakh a year if the person leaves inside twelve months. Retention is not a soft metric, it is a line item.
Annual cost is the budgeting number. Cost per productive hour is the decision number. It divides the amortised annual cost by working days minus paid leave and holidays, then by hours per working day. Use it to:
| Item | Per year (Rs) |
|---|---|
| CTC (employer PF and gratuity already inside) | 12,00,000 |
| EDLI and PF admin charges on Rs 25,000 (Rs 125 + Rs 125 a month) | 3,000 |
| Insurance, workspace, software and payroll admin | 1,02,000 |
| Recruitment, laptop and onboarding (Rs 1,35,000) over 3 years | 45,000 |
| True annual cost | 13,50,000 |
| Productive hours: (250 minus 30 days) x 8 | 1,760 hours |
| Cost per productive hour | 767 |
No management overhead allocation, no office rent apportionment beyond the workspace figure you enter, no training budget, no productivity ramp discount for the first few months, and no employee side deductions such as the 0.75 percent ESI or the 12 percent employee PF, because those come out of the employee's own wages and are not additional employer cost. Add your own figures in the overhead fields if you want them counted.
If recruitment cost is what pushes your per employee figure up, that is the part you can fix. GetHirePlus runs AI resume screening and AI interviews so your team spends less time filtering and more time with the right candidates.
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