I am new to this forum and would like to have one clarification. Gratuity is paid to an employee who completes 5 continuous years of service in a company. Also, Gratuity is the liability of the employer, and the employee does not have to contribute to it. Nowadays, companies add the Gratuity in the CTC to increase the CTC amount.
My question is that when Gratuity is not paid each month, then the Gratuity amount which is shown in the CTC breakup, will it be paid each month to the employee? If yes, then will that not mean that each month Gratuity is being paid to the employee from the beginning and will that employee not be paid any gratuity after 5 years of service (on resignation or termination)? If no, then will that Gratuity amount be deducted from the employee's salary each month even though the employee does not have to contribute to it.
Please clarify and assist.
From India, Mumbai
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My question is that when Gratuity is not paid each month, then the Gratuity amount which is shown in the CTC breakup, will it be paid each month to the employee? If yes, then will that not mean that each month Gratuity is being paid to the employee from the beginning and will that employee not be paid any gratuity after 5 years of service (on resignation or termination)? If no, then will that Gratuity amount be deducted from the employee's salary each month even though the employee does not have to contribute to it.
Please clarify and assist.
From India, Mumbai
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Dear Archana,
The question is a little bit confusing, but based on my understanding, let me clarify it. Gratuity is a statutory contribution, and even though it is mentioned in the CTC breakup, it is not directly paid to the employee on a monthly basis. It is contributed in the name of the employee to the Gratuity Act (LIC). Only regular employees who have completed continuous service for 4 years and 240 days are eligible for gratuity (only at the time of leaving the organization, either by resigning or retiring).
If the provided answer does not address your query, please provide clarification in your question.
From India, Hyderabad
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5The question is a little bit confusing, but based on my understanding, let me clarify it. Gratuity is a statutory contribution, and even though it is mentioned in the CTC breakup, it is not directly paid to the employee on a monthly basis. It is contributed in the name of the employee to the Gratuity Act (LIC). Only regular employees who have completed continuous service for 4 years and 240 days are eligible for gratuity (only at the time of leaving the organization, either by resigning or retiring).
If the provided answer does not address your query, please provide clarification in your question.
From India, Hyderabad
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Hi,
Thank you for your reply. I completely agree with you.
I just want to know if, in an employee's CTC breakup, gratuity is mentioned and if that employee leaves the organization before 5 years of service, then in that case, whether the company will pay the employee the gratuity amount that the company has contributed in the name of the employee to the Gratuity Act. Because in this scenario, the employee has not completed 5 years of continuous service but still, from his CTC, a monthly gratuity amount has been kept by the company in his name to the Gratuity Act. If the company pays the gratuity amount when the employee leaves either after 5 years or before that, then it's okay. But if not, then is the employee not at a loss as he is losing out on the money which was promised to him in his CTC breakup.
Regards,
Rachana Shetty
From India, Mumbai
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Thank you for your reply. I completely agree with you.
I just want to know if, in an employee's CTC breakup, gratuity is mentioned and if that employee leaves the organization before 5 years of service, then in that case, whether the company will pay the employee the gratuity amount that the company has contributed in the name of the employee to the Gratuity Act. Because in this scenario, the employee has not completed 5 years of continuous service but still, from his CTC, a monthly gratuity amount has been kept by the company in his name to the Gratuity Act. If the company pays the gratuity amount when the employee leaves either after 5 years or before that, then it's okay. But if not, then is the employee not at a loss as he is losing out on the money which was promised to him in his CTC breakup.
Regards,
Rachana Shetty
From India, Mumbai
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Hi, please reply to my query.
My father works as a D.E. engineer at GEB. A case was filed against him by the ACB in 1998, and he lost the case in court in 2005. The department terminated him in 2005. Ten days after his termination, he passed away due to cancer.
We have received the PF form from the department, but gratuity has not been given to us. Can you please tell me if we are eligible to receive gratuity if an employee is terminated due to an ACB court case?
From Netherlands
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My father works as a D.E. engineer at GEB. A case was filed against him by the ACB in 1998, and he lost the case in court in 2005. The department terminated him in 2005. Ten days after his termination, he passed away due to cancer.
We have received the PF form from the department, but gratuity has not been given to us. Can you please tell me if we are eligible to receive gratuity if an employee is terminated due to an ACB court case?
From Netherlands
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Dear Rachana Shetty,
CTC stands for Cost to the company incurred for that particular job. The company has to fix that this much of an amount has to be spent on this particular person/job to arrive at their liability limit. The monthly contribution of 4.81% from your basic is to be accumulated until your services with the organization. However, you are eligible to receive it only upon completion of 5 years of service.
This calculation is made to enter the liability of the company through the books of account as a provision for future use. The fund is a book value and not to be deposited anywhere, including under the Gratuity Act as you mentioned. Similarly, the provision for a bonus should also be given at the beginning of every fiscal year.
Just imagine the financial commitment of a company when 20-30 employees leave their jobs after more than 5 years of service. The provision for gratuity will help the company in situations like this.
I hope I have made it clear!
S. Sethupathy
Excellent HR Services.
From India, Coimbatore
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CTC stands for Cost to the company incurred for that particular job. The company has to fix that this much of an amount has to be spent on this particular person/job to arrive at their liability limit. The monthly contribution of 4.81% from your basic is to be accumulated until your services with the organization. However, you are eligible to receive it only upon completion of 5 years of service.
This calculation is made to enter the liability of the company through the books of account as a provision for future use. The fund is a book value and not to be deposited anywhere, including under the Gratuity Act as you mentioned. Similarly, the provision for a bonus should also be given at the beginning of every fiscal year.
Just imagine the financial commitment of a company when 20-30 employees leave their jobs after more than 5 years of service. The provision for gratuity will help the company in situations like this.
I hope I have made it clear!
S. Sethupathy
Excellent HR Services.
From India, Coimbatore
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Dear Vijay,
ACB (Anti-Corruption Bureau) cases viewed under this Clause of Gratuity Act:
"The gratuity payable to an employee could be forfeited for willful omission or negligence causing damage, loss, or destruction of employers' property and for riotous and disorderly conduct and for offenses/misconducts involving moral turpitude."
When your father lost the case, it means he has no right to claim the gratuity.
S. Sethupathy, Excellent HR Services.
From India, Coimbatore
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ACB (Anti-Corruption Bureau) cases viewed under this Clause of Gratuity Act:
"The gratuity payable to an employee could be forfeited for willful omission or negligence causing damage, loss, or destruction of employers' property and for riotous and disorderly conduct and for offenses/misconducts involving moral turpitude."
When your father lost the case, it means he has no right to claim the gratuity.
S. Sethupathy, Excellent HR Services.
From India, Coimbatore
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