View Tejas  Kumar 's Profile
Why bonus is not part of CTC ?
Hi All,

Please tell me why its not a part of CTC...
Asked by Tejas Kumar | April 12, 2012 | Report this Report abuse |  Reply now
Replies (3)
View Abhilasha Sharma 's Profile
Employer has no control over the statutory benefits like, Bonus, PF, Gratuity etc that is why they are not included in CTC ( cost to company) however, other Costs like Basic Salary, HRA, other allowances can be negotiated if Salary is not based on a fixed Package.
April 17, 2012 | Report this Report abuse
View John  Evans 's Profile
Thanks for the post.
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Hope this helps!
April 17, 2012 | Report this Report abuse
View Deepali  Rai 's Profile
Conceptually, Bonus is a share in profits of the organization.
By provisions of the act itself, some employees will get covered under the act and others may not be covered.
This situation also changes as the emoluments rise over a period of time and as the government raises coverages limits under the act.

It is a fact that even if the organization makes a loss, it is obliged under the act to pay a minimum bonus of 8.33% as per stipulations of the act, to the covered employees.

These two statements will make it clear that bonus can change from time to time and from people to people depending upon the coverage status scenario.

Now, when we talk about CTC, we mean that it is the cost incurred by the employer in respect of the employee for have employed him/her. CTC is NOT the money the employee gets in in his hands every month or periodically. Organizations must confine the use of concept of CTC only for purpose of budgetting employee costs for the organization and certainly NOT as a tool to bargain salaries during recruitment. But many employers seem to do this (perhaps since there is no law against it!).

Salary is a sum of Direct payments that the employee gets in his hands whether monthly or periodically. There are certain Indirect Payments like benefits of Provident Fund, ESI etc. he will be eligible to (though not necessarily entitled to, if he does not fulfill laid down criterion) and there would be Incidentals Payments that are conditional and may accrue upon some specific results being achieved, like, Commission on sales, production incentives, attendance bonus etc.) The non monetary benefits cost to the organization but do not represent "money in hands" as far as the employee may be considered.

Therefore during salary negotiations, our approach should be to compare on "like to like" basis, as far as possible. Alternatively we must build complete CLARITY about what is being discussed, negotiated and contracted, such that there will be no room for ambiguity, confusion or misunderstanding.
April 16, 2012 | Report this Report abuse