Is It Legal for Companies to Include Paid Leave in Your Salary Package? Let's Discuss!

Hi all,

I have joined a new organization, and they have given me an appointment letter stating that paid leave is included in the CTC. Is it legally possible to do it?

Thank you.

No, it's wrong. The company cannot include paid leaves in CTC. Paid leaves are a statutory requirement and must be provided.

Dear Ravi,

Paid leave cannot be included in the CTC. It is just that when an employee with more than a year of experience leaves the organization and in case his/her accumulated untaken PL is there, it can be encashed. But that too depends on company norms.

Rgs,
Lavanya :)

As mentioned by our other colleagues on this site, it is correct that paid leave cannot be included in the CTC.

By the way, which company is this?

Hi Ravi,

Let us look at it from another angle. CTC includes every cost that the employer incurs upon an employee during his employment tenure. Some are tangible, which are generally shown in the offer letter/salary stack-up sheet. There are some intangible costs which are not shown in the offer letter, but they are costs to the company, e.g.:

1. Paid Leave
2. Recruitment cost
3. Workstation cost
4. System cost
5. Communication cost
6. Refreshment cost
7. Stationery cost
8. Rewards cost
9. Administration cost on PF, ESI, Gratuity, etc.

These are all part of CTC to the company but are not known to employees. Logically, management has to consider the above costs for their budget and expenses because indirectly they have to fund the money for the above. However, they do not negotiate on the above as part of the compensation package.

Regards, Anup

Hi,

In CTC, the employer contribution in PF will be included along with other allowances like LTC. Additionally, the performance bonus will also be included in CTC.

I hope I'm correct with this. If wrong, please update me in this regard.

Waiting for your reply.

Regards,

Sivaranjani Sriram
9843206355

Hi Sivaranjani,

You are correct. Most companies consider all these as components of CTC.

Some companies also include picnics, training (e.g., seminars), marriage allowances, etc., as well. They insist these are costs incurred by the company and show them in the CTC.

Siva

Dear Friends,

CTC means by paying 'X' amount to an employee how much the company is incurring expenses. Please correct me if I am wrong. Leave Salary/encashment is a kind of reward given to an employee for his devotion towards his employment. Besides, Leave encashment is one of the basic terms and conditions of employment and is also statutory. Some authors suggest that leave encashment is one of the welfare measures/benefits. Therefore, it is not justifiable to consider leave encashment as one of the components of CTC.

For your information, in Bangalore, some BPOs and IT industries quote CTC as Rs. 22,000/-, and the take-home salary is only Rs. 9500/-. The balance amount is deducted in the form of company expenses. Therefore, in my understanding, the components of CTC should include Basic, (DA), HRA, Conveyance, etc., Transportation, Free lunch, Bonus, all allowances, Insurance.

Regards,

Michael Nicholas

Hi,

Paid leave cannot be included in the CTC. Usually, CTC includes PF, Professional Tax, etc. Paid leave or Earned leaves can be allotted to the employee after completion of one year in the organization. This is a statutory requirement; hence, it shall not be included in the CTC.

Regards, U. Anjan Kumar

Dear friends,

CTC stands for Cost to Company, which includes all expenses incurred by the company for each employee, ranging from basic salary to bonuses, etc. Leave salary encashment is also considered a cost to the company. Therefore, every component of an employee's salary that the company has to pay, whether directly or indirectly, is an expense to the company. Hence, leave salary can be included in the CTC.

Yogesh