Term · Explained
Total compensation (CTC)
The total yearly amount an employer spends on an employee. Called CTC in some countries and total compensation or total cost of employment in others.
Read more All hr glossary
Pay & benefits
Tax withholding and the annual tax statement
The income tax an employer deducts from pay, and the year-end statement that shows what was earned and withheld.
- Topic
- Pay & benefits
- Read time
- 2 minutes
- Level
- Beginner
- Applies to
- HR teams and employees
What it means
In many countries employers withhold income tax from each salary payment and pay it to the tax authority, then give employees an annual statement of earnings and tax withheld (names vary, such as W-2, P60, or Form 16). Employees may need it to file a tax return. Rules and deadlines follow each country’s tax year.
Benefits
- Helps employees understand their pay and benefits.
- Reduces payroll questions to HR.
- Builds trust through clarity.
- Helps compare offers correctly.
Example
- Tax is withheld every month and the annual statement is issued shortly after the tax year ends.
Related terms
- Tax declaration
- Tax identification number
- Income tax return
Rates, limits, and rules (for example for pensions, social insurance, and end-of-service pay) differ by country and company and change over time. Treat these as general explanations and confirm the current position where you operate before relying on them.
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