Cost-to-Company (CTC)

It’s a deceptively simple question, really. How much does someone cost?

Not in a cynical, spreadsheet sort of way, but in the kind of way that keeps founders up at night and makes finance teams start quietly whispering about hiring freezes. You’re trying to grow a business. That means hiring people. And with every new offer, there’s a number you have to land on. One that’s high enough to attract talent, low enough to make sense on paper, and somehow still fair enough to not spark salary envy six months later.

And this is where a tidy little phrase shows up: Cost to Company. Or CTC, if you prefer your headaches abbreviated.

At first glance, it feels like a helpful number. A single figure that sums up everything you’ll spend to hire someone. But the moment you scratch the surface, you find layers. Layers filled with assumptions, country-specific quirks, and more than a few awkward conversations about take-home pay.

So let’s pull this apart properly. Because getting this wrong doesn’t just burn through budget — it burns trust, too.

That number on the offer letter? It’s not what it looks like.

Let’s start at the foundation. Cost-to-Company, or CTC, is the total amount a company spends on an employee in a year. That includes the obvious things, like their salary, and the not-so-obvious things, like retirement fund contributions, insurance, and the value of benefits they may or may not even use.

It’s a way to capture the full picture. But the full picture isn’t always the clearest one.

CTC is often confused with what lands in an employee’s bank account. In reality, take-home pay is what’s left after the employer has covered things like medical aid or pension contributions on their behalf. In countries like South Africa, those employer-paid benefits are counted as part of the CTC, even if the employee never sees that cash directly.

So when someone signs an offer for R600,000 and only pockets R35,000 a month, it doesn’t take long before the questions start. And no, telling them to “check their payslip” doesn’t make it better.

The risk isn’t what you pay. It’s what they think you’re paying.

If you’ve ever had to explain a salary package to someone mid-way through their notice period at another company, you’ll know the danger here.

CTC can create a false sense of generosity. You believe you’re offering a competitive package, but the person receiving it might walk away thinking they’ve been short-changed.

Part of the issue lies in how things used to work. Many companies previously used a basic salary plus benefits model. You’d offer someone a base pay, and the company would layer medical aid or retirement funding on top.

Now, with the rise of total package models — especially in South Africa — all of that gets bundled into the CTC. Which means the same R600,000 package might feel smaller simply because it’s been relabelled. Same benefits. Same cost to the business. Very different perception.

The key issue? Flexibility without context doesn’t feel like freedom. It feels like a trick.

One phrase, five countries, ten interpretations

CTC has global ambitions, but very local meanings.

In India, CTC is practically a national institution. It includes everything — salary, allowances, statutory bonuses, gratuity, even the employer’s contribution to retirement funds. And sometimes, for good measure, companies toss in things like the cost of meals or office transportation. Candidates are expected to know their current and expected CTC down to the last rupee. It’s not just a number. It’s a currency of trust — or confusion, depending on how it’s handled.

South Africa is similar in structure but different in attitude. There, CTC is usually the total guaranteed package. Bonuses are mentioned separately. So are commissions. But retirement contributions, group life insurance, medical aid — those all sit inside the CTC envelope. Which means someone’s monthly payslip could look very different depending on how they’ve structured their benefits, even if their CTC is identical to a colleague’s.

The UK and the US take a different approach. They don’t really use the term CTC at all. Instead, they advertise gross salary and list benefits separately. That’s fine when hiring locally. But the minute you try to recruit someone across borders, things get messy fast. That £60,000 offer you made to a South African might actually feel like a pay cut once the benefits and taxes are baked in. Even if, technically, it isn’t.

So when someone says “my current CTC is X,” your first response shouldn’t be “great.” It should be “let’s unpack what that includes.”

Adding stock to the mix is a quick way to lose trust

Here’s where things get tricky: equity. In the startup world, stock options are often touted as a key part of total compensation. And they can be — if they’re explained properly. The trouble starts when companies start slapping theoretical values onto equity and folding them into the CTC.

This happens more than it should. Founders will take the estimated value of a stock option package, divide it across four years, and quietly insert it into the CTC figure like it’s cold hard cash.

It’s not. Equity is not a cash benefit. It’s a potential upside. It’s a bet. It’s a piece of the future that may or may not materialise. Including it in a CTC number without explanation is like offering someone a cake made out of promises. Looks sweet. Fills nothing.

Be clear. Show the cash components. Then separately show the equity components. Not just for legal clarity, but because nobody likes feeling misled. Especially not on payday.

Two people. One job title. Totally different experiences.

This is where CTC, as a concept, quietly collapses under its own weight.

Let’s say you hire two developers. Both are on a R700,000 CTC package. But one has a family and needs full medical aid coverage. The other is single, healthy, and opts out of everything they can. One takes home R38,000 a month. The other clears R46,000.

Same job. Same title. Same CTC. But the outcomes aren’t remotely equal.

Now imagine that difference plays out across multiple departments, multiple teams, multiple salary bands. Eventually, someone notices. And when they do, you’d better have an answer.

CTC makes budgeting easier. But it doesn’t make compensation fairer. That’s on you to manage.

Global teams break this stuff wide open

You can’t build a distributed team on assumptions. And you definitely can’t build one on CTC alone.

If your team stretches across Johannesburg, Nairobi, Bangalore and London, the way you present compensation needs to adapt. Because what feels normal in one place can feel deeply confusing in another.

That means ditching the one-size-fits-all offer letter. It means building internal tools that help translate CTC into local norms. And yes, it means educating your hiring managers so they don’t end up quoting numbers that sound great in Cape Town but absurd in Cardiff.

Global compensation isn’t just about money. It’s about meaning. Get the context wrong, and even a generous offer can land like an insult.

Most people won’t ask for clarity. You need to offer it anyway.

There’s a quiet expectation in a lot of companies that employees will “figure it out” when it comes to their package. They’ll read the contract. They’ll understand the breakdown. They’ll notice the difference between gross, net, and taxable income.

They won’t. Or at least, not until something feels off. And by then, it’s often too late to reset the relationship.

Use CTC as an educational opportunity. Break it down. Show the maths. Explain what’s cash and what’s contribution. If you offer benefits, explain the value. If you offer stock, explain the risk. If you want people to see the package as more than a salary, you have to prove that the rest is worth something too.

Transparency isn’t a legal requirement. But in practice, it’s what keeps people from quietly updating their LinkedIn profiles.

What all this really comes down to

CTC isn’t the enemy. But it’s not your ally either. It’s a tool. A mirror, if you use it well.

When handled right, it can help align expectations, reinforce value, and show that your company takes compensation seriously. When handled poorly, it’s a shortcut to confusion, resentment, and awkward meetings where people say things like “I thought I was earning more than this.”

So be specific. Be local. Be honest. Because nobody ever left a job because their employer communicated too much about how pay works.