Understanding CTC and Its Components
The issue of CTC has already been discussed in this forum several times, and the questioner may go through them to understand the concept of CTC and its impact on the actual earnings of the employees.
What is CTC?
CTC, or Cost To the Company, is the total annual expenses incurred by the company per employee. In other words, it is the gross salary actually payable plus the value of benefits. The benefits normally comprise statutory contributions payable by the employer in respect of the employee to EPF, ESI, Gratuity Fund, etc., and non-statutory contributions like Personal and Family Health Insurance premiums or the value of medical reimbursements as the case may be, statutory bonus, surrender leave salary, canteen subsidies, and the like. In fact, it is only a trick or allurement to attract employees for the reason that apart from the actual salary and other periodical statutory payments, the employee would get each and every benefit shown in the CTC only when the occasion for it arises, subject to his eligibility for that benefit.
Gratuity and CTC
Making an annual provision for Gratuity on an actuarial basis is, if I remember correctly, the obligation of the employer as per Accounting Standards [AS 16]. Hence mention in the CTC. The employee can claim gratuity only on his fulfillment of the eligibility conditions. Just because it is mentioned in the CTC, he cannot claim it when his contract of employment gets terminated on completion of three years. One should remember that CTC is a mere statement of projected cost per employee and not part of the contract of employment.