One of our employees joined at the age of 54 years as a Manager, and now he is 58 years old. The question is whether he is eligible for Gratuity. Gratuity is applicable only upon completion of 4 years and 240 days of service. The employee is now demanding the Gratuity amount, which was included as part of his CTC.
In this case, how should we proceed? Your guidance on this matter would be greatly appreciated.
From India
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1In this case, how should we proceed? Your guidance on this matter would be greatly appreciated.
From India
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Dear friend,
The age of the employee at the time of entry into the service of the establishment is not a criterion of eligibility for gratuity under the Payment of Gratuity Act, 1972. On the contrary, it is the completion of the minimum qualifying length of continuous service of not less than 5 years on the date of termination of his employment other than death or disablement. As per the provisions of sec. 2-A(2) of the Act, if on the day of termination of employment, the employee has completed 240 days or 190 days in the 5th year of his service depending on the type of the establishment, he should be deemed to have completed 5 years of continuous service in the establishment.
CTC, being an accounting tool of the employer to assess his annual overall cost of employment per employee, has no statutory force in the matter of settlement of any claim for statutory gratuity.
From India, Salem
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The age of the employee at the time of entry into the service of the establishment is not a criterion of eligibility for gratuity under the Payment of Gratuity Act, 1972. On the contrary, it is the completion of the minimum qualifying length of continuous service of not less than 5 years on the date of termination of his employment other than death or disablement. As per the provisions of sec. 2-A(2) of the Act, if on the day of termination of employment, the employee has completed 240 days or 190 days in the 5th year of his service depending on the type of the establishment, he should be deemed to have completed 5 years of continuous service in the establishment.
CTC, being an accounting tool of the employer to assess his annual overall cost of employment per employee, has no statutory force in the matter of settlement of any claim for statutory gratuity.
From India, Salem
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Dear Colleague,
Very well guided by our colleague.
Kindly read in addition:
Age is not a criterion for Gratuity, and as per the provisions of the Gratuity Act, an employee who completes 5 years of service (condition exempted in case of death or disablement). Once he becomes eligible, 15 days of wages for every completed year of service are to be paid as gratuity, which is a payment to demonstrate the "gratitude" of the employer for the exemplary service rendered for the organization.
Coming to the second part on adding Gratuity as part of CTC:
This is an important factor, and I have the liberty to use the word "mistake" many organizations make while computing, negotiating, and documenting the CTC.
Components like:
- Provident Fund Contribution
- Gratuity
- ESI contribution
are mentioned in the CTC to understand the total cost the employer is incurring on an employee. But these are statutory and must comply; hence, there is no option.
Where the basic mistake arises is that when "negotiating" the offer, many companies add these components also and arrive to show "Total Increase of % in CTC" compared to the last employment. Say, 25% or 30% increase, etc. The candidate also accepts and comes in. When he leaves with less than 5 years of service, he loses the Gratuity Component that was negotiated and agreed upon. Here comes the confusion in many organizations. Hence, it is suggested to keep the cost of statutory components "out of negotiated increase %" and show in a different bucket and mention that such statutory benefits are applicable only when the employee completes the stipulated conditions under the relevant statute, etc. This will bring clarity to both sides.
From India, Chennai
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Very well guided by our colleague.
Kindly read in addition:
Age is not a criterion for Gratuity, and as per the provisions of the Gratuity Act, an employee who completes 5 years of service (condition exempted in case of death or disablement). Once he becomes eligible, 15 days of wages for every completed year of service are to be paid as gratuity, which is a payment to demonstrate the "gratitude" of the employer for the exemplary service rendered for the organization.
Coming to the second part on adding Gratuity as part of CTC:
This is an important factor, and I have the liberty to use the word "mistake" many organizations make while computing, negotiating, and documenting the CTC.
Components like:
- Provident Fund Contribution
- Gratuity
- ESI contribution
are mentioned in the CTC to understand the total cost the employer is incurring on an employee. But these are statutory and must comply; hence, there is no option.
Where the basic mistake arises is that when "negotiating" the offer, many companies add these components also and arrive to show "Total Increase of % in CTC" compared to the last employment. Say, 25% or 30% increase, etc. The candidate also accepts and comes in. When he leaves with less than 5 years of service, he loses the Gratuity Component that was negotiated and agreed upon. Here comes the confusion in many organizations. Hence, it is suggested to keep the cost of statutory components "out of negotiated increase %" and show in a different bucket and mention that such statutory benefits are applicable only when the employee completes the stipulated conditions under the relevant statute, etc. This will bring clarity to both sides.
From India, Chennai
Acknowledge(0)Amend(0)
Dear Colleague,
Very well guided by our colleague.
Kindly read in addition:
Age is not a criterion for Gratuity, and as per the provisions of the Gratuity Act, an employee who completes 5 years of service (condition exempted in case of death or disablement). Once he becomes eligible, 15 days of wages for every completed year of service are to be paid as gratuity, which is a payment to demonstrate the "Gratitude" of the employer for the exemplary service rendered for the organization.
Coming to the Second Part on Adding Gratuity as part of CTC:
This is an important factor, and I have the liberty to use the word "Mistake" many organizations do while computing, negotiating, and documenting the CTC.
Components like:
- Provident Fund Contribution
- Gratuity
- ESI contribution
are mentioned in the CTC to understand the total cost the employer is incurring on an employee. But these are statutory and must comply; hence, there is no option.
Where the basic mistake arises is that when "negotiating" the offer, many companies add these components also and arrive to show "Total Increase of % in CTC" compared to the last employment. Say 25% or 30% increase, etc. The candidate also accepts and comes in. When he leaves with less than 5 years of service, he loses the Gratuity Component, which was negotiated and agreed. Here comes the confusion in many organizations. Hence, it is suggested to keep the cost of statutory components "out of negotiated increase %" and show in a different bucket and mention that such statutory benefits are applicable only when the employee completes the stipulated conditions under the relevant statute, etc. This will bring clarity to both sides.
Take care, Dr. P. SIVAKUMAR Doctor Siva Global HR Tamil Nadu
Disclaimer: When any article is referred, kindly read for academic purposes only and do not make decisions, do not go with any vendor or agency for that matter.
The write-up is a general view, and the reader is advised to have his own wisdom and knowledge and further refer to competent professionals and then only take a call on his/her own.
From India, Chennai
Acknowledge(0)Amend(0)
Very well guided by our colleague.
Kindly read in addition:
Age is not a criterion for Gratuity, and as per the provisions of the Gratuity Act, an employee who completes 5 years of service (condition exempted in case of death or disablement). Once he becomes eligible, 15 days of wages for every completed year of service are to be paid as gratuity, which is a payment to demonstrate the "Gratitude" of the employer for the exemplary service rendered for the organization.
Coming to the Second Part on Adding Gratuity as part of CTC:
This is an important factor, and I have the liberty to use the word "Mistake" many organizations do while computing, negotiating, and documenting the CTC.
Components like:
- Provident Fund Contribution
- Gratuity
- ESI contribution
are mentioned in the CTC to understand the total cost the employer is incurring on an employee. But these are statutory and must comply; hence, there is no option.
Where the basic mistake arises is that when "negotiating" the offer, many companies add these components also and arrive to show "Total Increase of % in CTC" compared to the last employment. Say 25% or 30% increase, etc. The candidate also accepts and comes in. When he leaves with less than 5 years of service, he loses the Gratuity Component, which was negotiated and agreed. Here comes the confusion in many organizations. Hence, it is suggested to keep the cost of statutory components "out of negotiated increase %" and show in a different bucket and mention that such statutory benefits are applicable only when the employee completes the stipulated conditions under the relevant statute, etc. This will bring clarity to both sides.
Take care, Dr. P. SIVAKUMAR Doctor Siva Global HR Tamil Nadu
Disclaimer: When any article is referred, kindly read for academic purposes only and do not make decisions, do not go with any vendor or agency for that matter.
The write-up is a general view, and the reader is advised to have his own wisdom and knowledge and further refer to competent professionals and then only take a call on his/her own.
From India, Chennai
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Gratuity Eligibility.pdf
Gratuity Benefits-pOINTS TO BE NOTED.docx
Gratuity-Leave calculation on CTC-Rev..xls