Bonus is a payment made beyond the salary and perks and usually linked to productivity or performance. In the context of business, it literally means “Extra” which is more than regular salary or wage. It is a statutory obligation for an employer to pay the employees “Bonus” at a fixed rate
The minimum bonus amount must be at 8.33% and maximum must not go beyond 20% of employee’s wages.
Ex-gratia is given as a mark of compassion voluntarily. Usually for the employees who are not covered under the Bonus Act, Exgratia is paid.
Non profitable organizations such as Hospitals, Social work organizations, NGOs etc are not covered under Bonus Act, 1965.
Although for the employees who comes under the Bonus Act, if the employer wishes to pay the beyond 20% of wages, it is given in the name of Exgratia.
Circumstances where the Exgratia is paid:
Employer may wish to pay some amount (As acknowledgement of the worker’s contribution) out of the revenues of the firm in case the profits do not support to pay the bonus.
On completing a specific period of existence, executing a large export order or any other event which marks significance, employer may pay some amount as Exgratia.
Any other reason that is NOT a binding on the employer, but the employer "wishes" to make such a payment to employees.
When the employer wishes to pay the employees an amount after paying the maximum bonus of 20% on wages.
Can Exgratia be included in to annual CTC?
Annual CTC means the total cost incurred on an employee in a year. In a management perspective, the employer may consider it for arriving at a cost to employ so many employees at any given point of time. It is purely at the discretion of the management.
When you consider the character of the payment (being ex-gratia) it should not be a part of CTC. It may be so, in particular year when it is paid. If it is going to be recurred every month/year, it loses the character of being Exgratia and can be called as some other earning head which can be included in CTC and paid regularly.