Probably the concept of CTC would have emanated from a stipulation under the Accounting Standards of ICAI that all Cost of employees should be accounted on accrual basis, whether paid or payable later. That's why the gratuity like other annual costs on accrual basis are accounted in every year's accounts of an estt. to arrive at the Profit or Loss of the estt. at any point of time. Therefore grauity together with contributions to PF, ESI, cost of leave accrued, LTA, Insurance, other allowances, perquisites and other employee related benefits etc. are bracketed under the CTC. Thus gratuity in CTC is inclusive. However the stipulation that those complete 5 yrs. of continuous service only eligible to receive should be done away with for the simple reason that gratuity accrued has already been earned by the employee and therefore accounted by the employer year after year and must be converted as "due & payable as and when he/she leaves" like leave balance encashable. In denying gratuity to those fall short of 5 yrs. service gives undue advantage/enrichment to the employer because it was already charged in the A/cs but only written back in the year of leaving by overall adjustment/arriving at incremental liability.
Therefore gratuity while can be considered under CTC but subject to actual payment/disbursement only to become legal. Who will bell the cat ?
From India, Bangalore
1075Therefore gratuity while can be considered under CTC but subject to actual payment/disbursement only to become legal. Who will bell the cat ?
From India, Bangalore
Once people understand that CTC(Cost to Company) is the sum of all rewards and benefits which a company is providing to the employee.
All direct benefits eg Salary,Da,Indirect benefits eg interest loans,Sodexo coupons and savings contribution-eg Gratuity,EPF will be included.
Gratuity will be paid if due after 5 years continous service,company includes the expense in CTC.
Nothing wrong with that.
As long as one realises his take home pay will be lower than CTC,then no confusion will arise.
From India, Pune
All direct benefits eg Salary,Da,Indirect benefits eg interest loans,Sodexo coupons and savings contribution-eg Gratuity,EPF will be included.
Gratuity will be paid if due after 5 years continous service,company includes the expense in CTC.
Nothing wrong with that.
As long as one realises his take home pay will be lower than CTC,then no confusion will arise.
From India, Pune
The Govt. is any way proposing that like PF, the Gratuity also can be transferred to the new company and continuous service, i.e. without break in service will be the norm.
If the above proposal gets implemented, then the question automatically gets answered.
Regards,
Ashutosh Thakre
From India, Mumbai
If the above proposal gets implemented, then the question automatically gets answered.
Regards,
Ashutosh Thakre
From India, Mumbai
I don’t know whether the government has proposed like what Ashuthosh has said. The Govt. can propose anything without understanding the consequences. They want only votes and not welfare of people and therefore can announce anything before any general election.
I don’t think that this will be practical when the private sector employers are independent. In respect of an employee who leaves the service of an employer after 3 years he has no gratuity liability as such but the employer who hires this employee will be shouldering an unwanted burden of 3 years retrospective liability and he would be forced to pay gratuity if this person leaves him in just two years. This is not at all practical. Even in the case where section 4A is made mandatory and all state governments notify that gratuity fund is invested in LIC, it is not going to work because establishment who invests gratuity in LIC’s separate fund would be interested to get the unused funds of those who leave the company adjusted against its future instalments and would not be ready to let it go to another employer along with employees who leave. Therefore, the proposal would not work in our present scenario.
Madhu.T.K
From India, Kannur
I don’t think that this will be practical when the private sector employers are independent. In respect of an employee who leaves the service of an employer after 3 years he has no gratuity liability as such but the employer who hires this employee will be shouldering an unwanted burden of 3 years retrospective liability and he would be forced to pay gratuity if this person leaves him in just two years. This is not at all practical. Even in the case where section 4A is made mandatory and all state governments notify that gratuity fund is invested in LIC, it is not going to work because establishment who invests gratuity in LIC’s separate fund would be interested to get the unused funds of those who leave the company adjusted against its future instalments and would not be ready to let it go to another employer along with employees who leave. Therefore, the proposal would not work in our present scenario.
Madhu.T.K
From India, Kannur
Dear Madhu,
I fully appreciate your apprehension and statement, "In respect of an employee who leaves the service of an employer after 3 years he has no gratuity liability as such but the employer who hires this employee will be shouldering an unwanted burden of 3 years retrospective liability and he would be forced to pay gratuity if this person leaves him in just two years. This is not at all practical," but only when the Government proposes to share the burden of one organisation by the other. In that case, the industry, itself, would take up the cudgels against the Government to vehently oppose the move, as no organisation would like to pay from its own resources for the other.
But, probably, you seem to have misconceived the statement of Mr. Ashutosh Thakre. Mr. Ashutosh Thakre has stated, "the Gratuity also can be transferred to the new company and continuous service, i.e. without break in service will be the norm." I don't know the basis on which Mr. Thakre has stated so, but the sense of his statement does not seem to subscribe to the transfer of liability. What I understand is that the gratuity amount may be proposed to be transfered from one organisation to another on joining new organisation. So, the issue can be expected to be clear only after seeing the Government proposal.
From India, Delhi
I fully appreciate your apprehension and statement, "In respect of an employee who leaves the service of an employer after 3 years he has no gratuity liability as such but the employer who hires this employee will be shouldering an unwanted burden of 3 years retrospective liability and he would be forced to pay gratuity if this person leaves him in just two years. This is not at all practical," but only when the Government proposes to share the burden of one organisation by the other. In that case, the industry, itself, would take up the cudgels against the Government to vehently oppose the move, as no organisation would like to pay from its own resources for the other.
But, probably, you seem to have misconceived the statement of Mr. Ashutosh Thakre. Mr. Ashutosh Thakre has stated, "the Gratuity also can be transferred to the new company and continuous service, i.e. without break in service will be the norm." I don't know the basis on which Mr. Thakre has stated so, but the sense of his statement does not seem to subscribe to the transfer of liability. What I understand is that the gratuity amount may be proposed to be transfered from one organisation to another on joining new organisation. So, the issue can be expected to be clear only after seeing the Government proposal.
From India, Delhi
Dear Ashutosh,
To avoid misunderstanding and misconception in th minds of the members/ industry, it would be better if you please intimate the source of your information, alongwith its web link, to enable the membrs go through the proposal and form their view points based on the spirit of the proposal in its right perspective, rather than assume anything in the absence of the proposal.
From India, Delhi
To avoid misunderstanding and misconception in th minds of the members/ industry, it would be better if you please intimate the source of your information, alongwith its web link, to enable the membrs go through the proposal and form their view points based on the spirit of the proposal in its right perspective, rather than assume anything in the absence of the proposal.
From India, Delhi
Dear All,
Kindly find the link, based upon which i had said that the govt. is proposing to transfer the Gratuity like PF.
Labour law recast to add more leave to maternity, gratuity to be made portable - timesofindia-economictimes
Regards,
Ashutosh Thakre
From India, Mumbai
Kindly find the link, based upon which i had said that the govt. is proposing to transfer the Gratuity like PF.
Labour law recast to add more leave to maternity, gratuity to be made portable - timesofindia-economictimes
Regards,
Ashutosh Thakre
From India, Mumbai
Organisations can show gratuity as retiral benefits in CTC.. In this way it is clear that it will be applicable for an employee to take benefit of gratuity only on retirement or if he leaves the organisation after 5 years of service.
From India, Pune
From India, Pune
Transfer of gratuity from one establishment to another is already in vogue in Govt./Quasi Govt./PSUs where employees migrate from one to the other with mutual consent/prior arrangement. Of course these are not covered under the Gratuity Act but under their own Gratuity Rules. Like wise leave at credit, equivalent of which also transferred by remitting the cash equivalent from the transferring estt. to the transferee estt. Of course in these cases there is no 5 yrs. stipulation as in the Act. I think there is no ban if these arrangements are put into practice in other sectors also if both the parties agree for the benefit of employees involved. The fears of additional burden if and when implemented is only a misnomer as year on year gratuity contributions are already loaded in the accounts and therefore there won't be any addl.burden whatsoever. If I'm right even under the Act there is restriction to disburse to those <5yrs but not transferring the past service. Only missing link will be how to address if at all there arises a break in-between.
From India, Bangalore
From India, Bangalore
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc