Hello, in this post we will discuss all about ex gratia. We will cover the following:
- What is ex gratia?
- Difference between ex-gratia and bonus
- When to pay ex-gratia to employees?
- Calculation of ex-gratia
- Can Ex-gratia be included into annual CTC?
What is Ex Gratia?
Ex-gratia means a payment made by the employer by their own choice voluntarily, out of kindness or grace under no obligation of any law. It is a form of incentive.
Difference between ex gratia and bonus
|It is paid as a mark of compassion voluntarily||This is based on the productivity and performance of the employee|
|There is no ceiling and also the % may get varied from year to year||The minimum bonus amount must be at 8.33% and maximum must not go beyond 20% of employee’s wages.|
|Usually, for the employees who are not covered under the Bonus Act, Ex-gratia is paid.||Bonus is paid who are covered under the Payment of Bonus Act|
When to pay ex-gratia to employees?
Employers need to pay ex-gratia to the employees in the following cases:
- In non-profit organizations like hospitals, social work organizations, NGO’s, etc. as they are not covered under the Bonus Act.
- Also, for the employees who come under the Bonus Act and wishes to pay ex-gratia beyond 20% of wages, it is given in the name of Ex-gratia.
Calculation of ex-gratia
Ex-gratia is calculated similarly as Bonus on Basic+DA. As it does not have a fixed percentage, the amount keeps varying and it depends from one company to another.
Can Ex-gratia be included into annual CTC?
Annual CTC (Cost to company) means the total cost incurred on an employee in a year.
When you consider the character of the payment (being ex-gratia) it should not be a part of CTC. It may be so, in particular, the year when it is paid. If it is going to recur every month / year, it loses the character of being Ex-gratia and can be called as some other earning head which the employer can include in CTC and paid regularly.