Understanding the Inclusion of Bonus in CTC and Legal Compliance in Salary Structure

Dear All,

I am working as a Senior Executive in a manufacturing company. We are planning to restructure the salary break-up. Kindly guide me on the following matters:

1. Management wishes to include the bonus (as per the Bonus Act 1965) as part of the CTC. Is it legally correct to do so?

2. Is there a limit on the LTA entitlement for an employee based on CTC?

Thank you.

Dear Prerana,

Bonus is not a part of CTC. Bonus means a reward given once a year at any festival or at the end of the year. There is a minimal amount specified to be given as a bonus, but if the company is performing well, you can give more bonus. Bonus can be cash, attendance bonus, ESOPS, etc.

As bonus is varying, it can't be part of CTC, and a reward is never the payment also.

The LTA amount is one month's basic salary for the employee. You cannot increase more than that.

Hi,

Some companies include bonus, LTA, and gratuity amounts in the CTC. Bonus is typically calculated as 8.33% of the basic salary, LTA is equivalent to one month's basic salary, and 4.75% of the basic salary is allocated as gratuity within the CTC. It is important to note that this practice is not illegal.

Thank you,
Giri

Dear Prerna Parry,

A bonus can't be a part of CTC. However, some companies include the bonus in the CTC provided.

Dear,

Any cost incurred by the employer on the employees can be covered in the CTC whether it is a statutory payment such as Bonus, Gratuity, Compulsory Insurance, etc. The employer enjoys the right to cover all such costs in CTC. An important point here is that the employer is not authorized to recover any statutory costs from the employees. Generally, the Statutory Bonus component is shown separately, and no deduction for its payment is shown.

Hi Maheh,

Could you please tell me where it's written that the bonus cannot be a part of CTC? If an employer is paying a bonus at a flat rate of 8.33%, is it good for the employee? What's wrong?

I am waiting for your response. Please provide explanations along with your points; don't just write without reason.

Warm regards,
Rahul

Dear All,

Bonus is a part of CTC. CTC stands for Cost to Company, and the bonus is included in the cost of the company. Many companies' bonuses are included in CTC.

Anil
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