In India, why does the platform show Employer Contributions like Provident Fund (PF) and Labour Welfare Fund (LWF) being educted from CTC to arrive at Gross Pay?

In India, salaries are commonly structured as CTC (Cost to Company) rather than just Gross Pay. CTC includes both the Employee’s Salary components and employer statutory contributions like Provident Fund (PF) and Labour Welfare Fund (LWF). In the platform, we start from this CTC figure and then separate out the Employer Contributions to arrive at the employee’s Gross Salary, following standard Indian payroll practice.

Details:

1. Indian offer letters typically define a single number as CTC, which includes:
   
   • Gross / fixed salary, and
   • Employer statutory contributions (e.g., Employer PF, LWF).

2. So, the Annual Gross Salary mentioned in the platform acts as the CTC. Employer Contributions like PF and LWF are deducted and the remaining is treated as the Employee’s Salary for Net Salary calculation.

Calculation Example:

So here, the company has decided:

“We are okay to spend INR 1,00,000 per month on this employee as salary (CTC).”

From this INR 1,00,000, two employer statutory contributions are carved out:

1. Employer PF = INR 1,800
2. Employer LWF = INR 68

These are amounts the employer has to pay to the government, not cash paid to the employee.

So the calculation is:

Monthly CTC                        =   INR 1,00,000

– Employer PF                      =   INR      1,800

– Employer LWF                  =   INR           68

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Employee Gross Pay          =   INR     98,132

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So:

1. INR 98,132 is shown as the Gross Monthly Salary (basis for tax, in-hand etc.)
2. INR 1,800 + INR 68 are still paid by the employer to PF and LWF authorities respectively, shown separately under Employer Contributions, though it is subtracted from CTC.