CTC stands for Cost to the Company. There is no clear definition of CTC, and that is the reason every employer, rather we, the HR people, include anything spent towards an employee or for the employee to retain him on a regular basis.
In the true sense, expenses like gratuity and bonus are periodical payments and contingent in nature, payable upon the happening or fulfillment of certain incidents, such as an employee staying for 5 years with the company or staying in the company for one fiscal year.
Now, the question is, what happens if this does not occur? The cost will not be borne by the employer. Since these are statutory requirements, we take the opportunity to include them in the CTC, which also reduces our tax burden to some extent.
Gratuity amounts should be kept in the gratuity fund after actuarial valuation or should be insured through LIC. How many employers do that?
In my opinion, expenses or costs payable at a given time should not be shown as part of CTC. While this may not directly contribute to non-compliance, it gives a negative impression of the company.
Take, for example, when a company provides a production bonus or incentive, they do not include it in the CTC. Then the question arises, should it be included in the list of CTC on a contingent basis?
My answer is NO. However, from the company's perspective, the company aims to fix its capital expenditure. Essentially, the concept of CTC is designed for that purpose.