Is a Bonus Really Part of CTC? Seeking Clarification for Our Company Auditor

Dear all members, our company auditor is asking for clarification. Is a bonus a part of CTC? Please clearly explain whether a bonus is included in the CTC and provide any notification if there is.

Understanding CTC Components

CTC (Cost to Company) consists of all costs that occur towards any employee. It includes PF (employer contribution), ESIC (employer contribution), Mediclaim, Personal Accident Policy, bonus, etc. There is no notification by the government as it is not a concern for the government; it is purely a company policy. This is an unwritten corporate law.

Regards,
Tushar Swar

The items falling under and forming part of the CTC are determined by the company, which decides what to include. As per the law, a bonus is calculated based on profits, and for this purpose, registers A, B, C, and D are maintained by companies. Currently, the eligibility for a bonus requires employment for a minimum of 30 days in the previous year and a salary of Rs 10,000.00. If we are paying a bonus to a person with a salary of Rs 20,000.00, technically, the payment given as a bonus is incorrect. It should be considered an ex gratia payment. Therefore, from a legal perspective, it is incorrect to mention a bonus in the CTC, as it requires a declaration for the financial year in which it has been given. Generally, companies practice showing Bonus and Gratuity as part of the CTC.

Understanding CTC and Bonus Inclusion

CTC means the Cost to Company, i.e., what is the cost of an employee borne by the company, including the gross salary. In addition to pon1965, I also agree that any compensation and benefits provided to employees are considered as CTC, with the bonus being a part of it. For this, no notification is required from either side.

Thanks and regards,

Sumit Kumar Saxena

Understanding CTC and Bonus Inclusion

In order to project an inflated CTC amount, the bonus amount is considered as part of the CTC. All benefits given to the employee, converted into cash value, shall be the total Cost To Company (CTC) for an employee. This is a procedure used by the HR team in the salary fitment process, before appointing an employee and offering a position.

Thanks,
R. K. Nair

Cost to Company (CTC) is not a statutory term defined in any of the Labour Laws; therefore, CTC has no statutory standing. Bonus is a statutory term and is subject to certain terms and conditions defined under The Payment of Bonus Act.

So, whether to include a bonus in CTC or not is entirely for the purpose of company accounts and finances and its internal policy.