Revising the CTC as per minimum Wages - if we are giving the bonus to employees then is it mandatory to mention in CTC or not?

I would like to request guidance on the Bonus Act. We are revising the CTC as per minimum wages, so I want to know if a bonus is a part of CTC or not. If we are giving bonuses to employees, is it mandatory to mention them in CTC or not? Please suggest.

Bonus is a payment to an employee. In respect of those whose salary exceeds Rs. 21,000, it is a statutory payment, and in respect of others, it is a non-statutory but an employee benefit. Anyway, if the bonus is paid annually, it should be considered a payment or employee benefit, and as such, it shall be included in the CTC.

Normally, bonuses, like other contributions payable by the employer, will be shown after the Gross salary is shown. In order to make it clearer, a salary structure shall contain Basic and VDA as per the minimum wages notification, then other allowances forming part of the salary like HRA, Conveyance allowance, and special allowance, and then gross salary. Bonus, which is paid annually, will come next to Gross salary only. If you have variable incentives, that can also be shown as part of CTC. You can also show the Employer's contributions towards ESI/EPF.

@Madhu Sir, I thought above 21k salary, a bonus is not mandatory. Please explain if I am wrong, sir.

Hi Vikas,

The Bonus Act or Bonus Payment Act regulates the payment of bonuses to employees. The treatment of bonuses in the context of Cost to Company (CTC) can vary, and it's advisable to check the labor laws.

Typically, the CTC includes all the components that form part of the employee's overall compensation, including basic salary, allowances, bonuses, benefits, and other perks. However, the treatment of bonuses in CTC can depend on company policies and practices.

Here are some general considerations:

Inclusion in CTC:
Many companies include the expected annual bonus in the CTC as it reflects the overall compensation package. This is often done to provide employees with a clear understanding of their total remuneration.

Mandatory Disclosure:
In some jurisdictions, there may be regulations or laws that require employers to disclose all components of the CTC to employees. If bonuses are a part of the CTC, it might be necessary to mention them.

Flexibility:
Some companies choose not to include bonuses in the CTC to maintain flexibility in bonus structures. In such cases, bonuses may be seen as variable pay and not guaranteed.

Bonus Policy:
It's crucial to have a well-defined bonus policy that outlines the criteria for bonus eligibility, calculation methodology, and payment timelines. This policy should be communicated clearly to employees.

Thanks

@RamGoswamy, Yes, in respect of employees whose salary (Bonus qualifying salary, like Basic and VDA) is above Rs 21,000, bonus is not mandatory. But it does not mean that you should not pay a bonus or mark it as a component of CTC. You can prefix the bonus and put it as part of CTC.