Legal Concerns: Can We Include Statutory Bonus in Total Employee Cost?

In order to have a consolidated view of Total Employee Cost, we recently restructured the salary breakup of employees to include Statutory Bonus as one of the components. Is it legally correct?

Legal Value of CTC

Your CTC has no legal value at all unless it is shown as part and parcel of your offer to the employee. Since CTC is only a yearly basis projection of the overall per-employee cost incurred by the employer in all respects, including statutory and non-statutory items, no question of legality would arise if statutory bonus is included in it. However, the only question is how you would quantify the bonus beforehand as it is related to the performance of the establishment in an accounting year.

As rightly stated by the learned member, CTC is not governed by any law. It has legal implications to the extent it is part of the contract letter.

CTC Overview

CTC is a monetary liability of the employer in terms of major components of salary, benefits, and perquisites committed. Statutory minimum bonus is a part of CTC.

Exclusions from CTC

In fact, several recurring employee cost items are not included in CTC—subsidized food, subsidized transport, concessional sale of the company's products, leave encashment, etc., which should get legitimately included.

Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant