Understanding CTC: Do Incentives and Benefits Count, and How Are They Shown in Payslips?

Hi friends, I want to know if CTC also includes incentives or any company benefits. For example, if an employee achieves more targets than expected, the company usually provides them incentives (usually cash). How do they give them, and what are the different procedures for giving employees incentives? Is it shown in the monthly Salary Slip? If yes, can somebody show me how?

From what I know:
Basic
+
HRA
+
TA
+
Other Allowance
+
PF + ESI contributions
=
CTC

Also, please explain what ex gratia is. It's urgent, friend. Please help me with samples if possible.

Hi Nitin,

Generally, incentives are not part of CTC; they are paid separately after the achievement of targets. The contents of the salary breakup are as follows, and you can prepare it according to your own suitability:

- HRA would be 50 or 60% of basic.
- Basic
- HRA
- TA
- Other Allowance
- Mobile Reimbursement per Month
- Gross Per Month = Sum of all the above.
- Gross Per Annum = 12*Gross/Month
- PF Contribution = 12% of Basic/Annum
- ESI Contribution = 4.75% of Gross/Annum
- Medical = The mediclaim facility provided to an employee who is not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Anything above this will be covered under Mediclaim or will depend on company policy.
- Ex-Gratia/Bonus = A fixed amount as Bonus
- Annual Fixed Gross Cost = Gross/Annum + Ex-gratia
- Annual Total Cost = AFGC + PF + ESIC
- Annual total cost is also called CTC.

I hope this clarifies everything for you. If you have any queries, feel free to ask.

Regards,
Amit Seth.

Hi Amit Sir,

Thank you again for your reply.

Sir, could you please explain the terms Fixed CTC and Variable CTC, and their components?

If I had to offer an employee in sales this type of CTC, with 2.25 lacs as its fixed CTC and 1.75 lacs as its variable, what does it mean?

Thanks,
Looking forward to your reply.

Dear Nitin,

To be very honest, CTC is one thing where you can add whatever you want. For example, even in the case of incentives, you can state that on average, one employee receives a certain amount of incentive.

There is a famous funny incident regarding CTC: There is an organization in Mumbai that was offering CTC to Management Trainees where the rent paid for the cubicle was included. The logic behind it was that Nariman Point is the costliest place in India, and the Management Trainee who gets selected is going to occupy the costliest cubicle.

Isn't it funny? So CTC, God help people for disguising the salary part so well.

Satyesh

Hi Nitin,

You are most welcome. It is my pleasure that I could help you prepare the same.

The difference lies in that a Variable CTC includes components that are variable. For instance, if you add an incentive to the CTC, then it would be considered a Variable CTC because incentives may vary from month to month. On the other hand, a CTC that consists of all fixed components would be an example of a Fixed CTC.

Regards,

Amit Seth.