Employees Earn their Leave as per provisions of Factory Act and Employer have no right to make it as a part of CTC as it is earned by employee.

2) Gratuity is a statutory right of employee whoever completes 5 years in the same organization, and is a terminal benefit

It cannot be part of CTC

Any employee receiving salary or wages up to RS.21,000 per month and engaged in any work whether skilled, unskilled, managerial, supervisory etc. is entitled to the bonus for every year if the employees have worked for not less than 30 working days in the same year.

• The minimum bonus will be 8.33% of the salary during the year, or

  • 100 rupees will be given in case of employees above 15 years and sixty rupees in the case of employees below 15 years, whichever is higher.

• The maximum bonus is 20% of the salary during the accounting year.

1. Every amount payable to the employee is CTC.

2. It does not make difference whether the amount is statutory, stipulatory or incentive.

3 The payment of bonus depends on the fulfillment of target, extra hour work and hence it varies from company to company.

Yes EL and gratuity can be part of CTC .

Mandatory percentage of bonus to be paid to employee is 8.33 % minimum and maximum 20%. 

No gratuity and earned leave not a part of CTC but it's a cash incentive and is beneficial to the employees

1. Earned Leave and Gratuity are two distinct entities. They should not be clubbed together and they should not be treated as part of CTC.

2. Any employee can go against the employer if not paid by the employer separately.

3. The mandatory percentage of bonus is 8.33% on wages.

If you have initially given CTC papers in that the bifurcation may have done by HR which amount will go where. 

Earned leave are not part of CTC. yes gratuity may be if its written in the LOI. 

These cases are very common in various Courts of India and Supreme Court of India
You know Cost-to-Company is total money to be spend on engagement of such resource, during a year. As per section 3 of Payment of Wages Act, 1936, every employer shall be responsible for the payment of all wages reported to be paid under this Act to persons employed by him and in case of persons employed in Factories, Industrial or other establishments, etc. Please understand that CTC is never equal to the amount of take-home salary of the employee. There are many components in the CTC, where one does not receive all as part of take-home salary.

While dealing with such kind of cases in Supreme Court I have observed that CTC will be having the following components – which may be monetary or non-monetary.

• Monetary : Gross salary + Employer contribution of ESI + Employer contribution of PF + Bonus + Gratuity + LTA

• Non-monetary : House accommodation + Car + Driver + Servant + Club membership, etc

Gross salary will have the following components

• Basic salary + HRA & other Allowances + Reimbursements

Net or Take home salary
• Gross salary – Income Tax – Employer’s PF contribution – Employee’s ESI contribution – Professional Tax

Variable bonus can be included as one of the Head in the CTC to form part of a compensation.

Statutory bonus may not be included in the CTC, as it is on the Profit earned by the Establishment during the Financial Year and available surplus to compute the percentage to be disbursed. Few establishments are having 8.33% of Basic+DA as a component in CTC but if the available surplus is more than such percentage to be disbursed as Statutory Bonus, it will be challenging to book.

Gratuity is paid only in case of permanent disablement or death or separation after 5 years (or 4.240 years in some States of India). In such case including Gratuity as part of CTC structure is infructuous. Where such money is paid to a Gratuity Trust formed by the employer, it can be included in the CTC.

Paragraph 31 of the Employees’ Provident Funds Scheme, 1952 states that “Notwithstanding any contract to the contrary the employer shall not be entitled to deduct the employer’s contribution from the wage of a member or otherwise to recover it from him”.

To my mind many of the employer in today’s world give the breakup of outgoings under different heads as CTC in the appointment letter issued to a new employee. Emoluments means all earning by an employee for the work done by him in an establishment and includes Bonus, Commission, etc, whereas Basic Wages (as defined in the Act) expressly excludes these items / components. CTC cannot be therefore construed to mean ‘emoluments which are earned by an employee within the meaning of the term ‘basic wages’ as given under section 2 (b) of the Act and contribution under section 6 of the Act cannot be thus charged on CTC.

In India there is a principle law relating to this procedure of payment of bonus to the employees and that principle law is named as Payment of Bonus Act, 1965. Every employee not drawing salary/wages beyond Rs. 10,000 per month who has worked for not less than 30 days in an accounting year, shall be eligible for bonus for minimum of 8.33% of the salary/wages even if there is loss in the establishment whereas a maximum of 20% of the employee’s salary/wages is payable as bonus in an accounting year. However, in case of the employees whose salary/wages range between Rs. 3500 to Rs. 10,000 per month for the purpose of payment of bonus, their salaries/wages would be deemed to be Rs. 3500.

You may contact my secretary to connect with me for clarification. 

I hope you and your family are safe and healthy. Stay home and be safe during Covid-19. 

Gopal Verma,

Advocate on Record & Amicus Curiae,

Supreme Court of India

For the calculation of cost to the company all the components of income to be employed is taken as cost to calculate be part of the cost company .

This decides by management whether to include LE and G, part of CTC. It’s a common practice. And due to this employee suffer low in hand salary. But in actual both are not part of CTC.

Employee Eligible for bonus drawing ₹21000 per month or less. Min 8.33%, and max at 20 %.

Earned leave as name suggests,  it is earned by the employee in the course of his employment and the gratuity is also earned by the virtue of the service he has put in his organization,  therefore they're his rights,  it cannot be combined with the CTC.

They're to be treated separately. 

The employee can initiate legal steps if the same are denied by the employer. 

The bonus act 1965 applies to all the companies that are more than 5 years old   have at least 20 employees and have made profit in that year. 

The minimum statutory bonus that an employer must pay an eligible employee is generally 8.33% of the employee's salary earned during the relevant accounting year and the maximum statutory bonus payable is 20%of the employee's salary earned during the accounting year. 

There is no clause for mandatory payment of bonus. 

Earned leaves and gratuity are not part of ctc

As per the bonus act, 1965, the bonus of the private sector is calculated as follows:

If the salary of an employee exceeds Rs. 7000, then the bonus should be calculated on Rs. 7000only. If the salary of an employee is less than Rs. 7000 then the bonus is to be calculated on the actual amount. 

This means all the employees whose salary is less than Rs. 21000 per month fall under criteria of bonus. 

No Earned Leave & Gratuity shall not be made part of CTS. 

Yes employee can challenge the action of organisation if any deviation is made by it.

Reply to your second post:

Yes it is specified, the same is 8.33% of salary earned by Employee during the year.

The gratuity will be settled by the Employer after completing five years of service by any person. No company will deduct gratuity amount from the employee. But this amount will be shown in the CTC by the companies. You will not be eligible for gratuity if you leave before five years of service.

Bonus is mandatory under Payment of Bonus Act. It is payable to the employees whose salary is less than Rs. 10000/- p.m. & is payable min. 8.33% and max. 20% depending upon the allocalble and available surplus. The limit of salary for calculation of bonus is Rs. 3500/-. The bonus can be set on and set off as per the act. If there is loss to the company then the amount of bonus is to be set on for the next five years and vise versa. The bonus is payable in 1st five years only for the years in which the company has earned profit

between 8.33% to 20%.

1. Earned leave and gratuity cannot be made a part of CTC by the employer.

2. Gratuity is a statutory right guaranteed to an employee on completion of 5 years service.

1. No earned leaves and gratuity are not part of CTC.

2. Yes employee can take legal action against organisation for not paying earned leaves and gratuity amount.

1. As per the information mentioned in the present query, makes it clear that there has been little confusion about the concept and head of earned leave and gratuity.
2. I would like to apprise you that these two are not part of your CTC.
3. It can be asked by an employee at any time in case of earless leave and gratuity only after spending almost 5 years of service in a single company without switching to another company.
4. No, there is no fix percentage of bonus to be awarded to the employees, but yes, it is mandate that the same head must be there in an organisation subject to its the availability of its men force and strength.

-  An employee is eligible to receive gratuity , only if he has completed minimum five years of service with an establishment.

- However, as per Madras High Court, the gratuity of an employee who completes 4 years and 240 days of service  is eligible for gratuity.

- Hence , Gratuity can not be a part of CTC

- The mandatory percentage of bonus is 8.33% on wages.

Yes an employee can go against the organisation. Yes the gratuity is a part of the ctc.

it is paid after 5 years of continuous service by the employee.

There is no set percentage stipulated by law for the amount of gratuity an employee is supposed to receive- an employer can use a formula-based approach or even pay higher than that. Gratuity payable depends on two factors: last drawn salary and years of service.

It is calculated on the basis of a formula.

(15×last drawn basic salary×tenure of working)÷26= gratuity.