New to HR: Should Performance-Based Pay Be Part of CTC for Basic Pay Calculation?

Dear Seniors,

I recently joined a company as HR. While preparing the offer letter, the CTC includes Basic, HRA, Medical allowance, Conveyance allowance, Special allowance, and Performance-based pay (which is paid out quarterly). My question to you all is: should I include the performance-based pay as part of CTC when calculating Basic pay, which is being calculated at 35% of CTC? Your prompt reply in this regard will be greatly appreciated.

Thanks,
Harini

Hi Harini,

CTC contains:
- Fixed Gross Pay (including all fixed allowances such as basic, HRA, Conveyance Allowance, Medical allowance, etc.)
- Benefits (company contributions such as ER contribution of ESI & EPF, gratuity, bonus, insurance, etc.)
- Variable pay (such as performance bonus/incentives).

Thank you.

Dear Harini,

If performance pay is fixed every month (but you pay quarterly), then you can include it in CTC. If it's fixed, then basic pay can be set accordingly. However, if it's not fixed (changes every quarter), then you need to set the basic pay excluding performance pay.

Warm regards,
Umesh Chaudhary