Understanding CTC: Do Bonuses and Incentives Count as Part of It?

Hi Everybody!

Shekar here.

Can anybody clarify if CTC also includes variables or incentives? Please, valuable inputs are required.

Can bonus, business incentives, and other variables be included in CTC? Probably many have ignored this. Please let us know.

Regards,
Somu Shekar

CTC stands for Cost to Company. It refers to any outflow from your company's funds related to one's compensation, mutually agreed upon and mandated by the statutes of that location. Some companies take this too far by converting office space and assets used by employees into commercial equivalents! :o

Best wishes,
Ravichandar HM v 8)

Hi,

Yeah, the incentives, bonus, etc. might be included in the CTC, but then it is not compulsory as incentives depend on performance. Obviously, at the time of joining the company, you will not be able to measure a person's performance.

The compulsory components of CTC would be basic salary, HRA, DA, PF, Gratuity, telephone bills, etc., which are more or less fixed expenses or outflow of cash. The rest depends on the company and how they want to design the salary structure. Some companies design it in a way that at the end of the month, there is very little in hand for the individual, while for others, it is more or less CTC/12.

It probably just confused you more, but take a few examples to your top management and ask them what kind of structure they want. The important point is that the employee should be aware of the salary break-up at the time of joining and any time there is a change in the structure.

Cheers!
Puja

Hi Shekar,

It depends on company to company. Some companies include bonuses and incentives in CTC to reduce your tax burden. In our company, bonuses and incentives are provided on top of the CTC.

The bonus is typically 8.33% of the gross salary or as per the level fixed by the company. Incentives are performance-based or as per the level within the company.

Thanks,
Ruchi

Hi All,

Thank you for the valuable inputs. More inputs will clear more doubts. Anyway, we had offered a CTC of 5.04 lakhs to the candidate, but he had rejected the offer since the amount of 50,000 was variable in the offered CTC. The same will be paid at the end of the year or 6 months (varies).

Still, he is on hold. Can anybody suggest what is the right way to approach the management as well as candidates? Comments requested.

With Regards,
Somu Shekar

Yes, it does. CTC is every single penny that the company spends on you, monetary as well as non-monetary. So don't be surprised if your company includes in your CTC boot-polish allowance too.

- Deepa

Hi Somu,

I hope you are doing fine. Please go through this; it might clear up a few things.

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Fixed:

Basic

HRA

Medical Allowance

Special Allowance

Conveyance Allowance...

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+ Variable

+ Incentives

--------------------------------------------------------------------------

Total CTC =

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Regards,

Deep

Hi Shekar,

I have some good MNCs and Indian companies as clients. Till now, I never saw them including variables/bonus/incentives in the CTC. It could be a possibility with others.

The second question raised by you is that the candidate is rejecting the offer.

Now, you people have offered him 5.04L with a variable of 50,000, so is this 50K assured or will it vary? Will it also be paid to him only in 6 months or maybe a year, which leaves the candidate with uncertainty because then it effectively makes your offer about 4,54,000. If that is the case, then check what he is currently drawing and whether he is really getting a standard hike because in case his take-home salary is less than or equal to what you are offering or probably giving him a very small hike, I am not sure how keen he will be in joining.

You can also check on his salary expectations so that you also have an understanding that his expectations are not unrealistic. In case that is the situation, it would be better to pursue the candidature of someone else.

As has been said, put in front of the management all that has been conveyed to you from the candidate on salary and tell the management about the candidate's expectations (if any). In case the management says that it is the best they can offer, then tell the candidate that this is the budget you guys have for this role and the best offer you can make "for this role." The rest is his choice.

Regards,

Prashant

Dear all,

CTC encompasses every single penny that the company spends on an individual, whether it's monetary or non-monetary. However, if an individual negotiates his/her salary components before joining the organization, then some of the components will not be part of the CTC.

Regards,
Arun K. Mishra

Hi there,

I am just trying my bit to be of some help here. Technically speaking, CTC is actually the amount the company spends on an individual for his service for a financial year. This should include every amount that the company spends on the individual, including the employer's contribution of PF, incentives, etc.

This example might help you: Gross Salary: INR 2,50,000 per annum CTC: INR 3,25,000 per annum (this includes the maximum incentive of INR 75,000 that can be paid to the employee in one financial year.)

This is as per my understanding. Please correct me if I am wrong.

Regards, Avi

Hi Everybody,

Thank you so much for all your valuable inputs. This information has helped to retain the employee. Once again, thanking you all. More inputs are always requested.

Regards,
Somu Shekar