Hi,
The appointment letter with the CTC becomes a contract of service.
In one case, the person leaving employment after one year of service was denied payment of 'gratuity'(4%) on the plea that he had not completed five years of service. The employee, challanged the action of the management and argued that it was part of the agreed CTC and a contractual obligation.
The case was settled by management in favour of employee. . Now, in the appointment letters against 'gratuity' column, it is written 'subject to eligibility'.
I shall be happy to get comments/sugggestions on this.
Cyril
From India, Nagpur
25The appointment letter with the CTC becomes a contract of service.
In one case, the person leaving employment after one year of service was denied payment of 'gratuity'(4%) on the plea that he had not completed five years of service. The employee, challanged the action of the management and argued that it was part of the agreed CTC and a contractual obligation.
The case was settled by management in favour of employee. . Now, in the appointment letters against 'gratuity' column, it is written 'subject to eligibility'.
I shall be happy to get comments/sugggestions on this.
Cyril
From India, Nagpur
Mr Cyril
I had been mentioning in appointments letters that gratuity shall be paid as per the provisions of The Payment of Gratutiy Act.
In the CTC sheet i give to the employee I add gratutiy and in bracket put as per Payment of Gratuity Act
If the letter does not mention anything about the Act and subject to eligibilty then you will end up paying
Siva
From India, Chennai
I had been mentioning in appointments letters that gratuity shall be paid as per the provisions of The Payment of Gratutiy Act.
In the CTC sheet i give to the employee I add gratutiy and in bracket put as per Payment of Gratuity Act
If the letter does not mention anything about the Act and subject to eligibilty then you will end up paying
Siva
From India, Chennai
Thanks,
We should be careful while incorporating items in the CTC. If eligibility to any item like, provident fund, bonus, gratuity etc. is based on provisions under law, the same should should be mentioned. Otherwise, they would become contractual obligations.
Cyril
From India, Nagpur
We should be careful while incorporating items in the CTC. If eligibility to any item like, provident fund, bonus, gratuity etc. is based on provisions under law, the same should should be mentioned. Otherwise, they would become contractual obligations.
Cyril
From India, Nagpur
The general components of salary are as mentioned below
Basic Salary
Commissions/Incentives
Bonus
Dearness allowance
Child Education Allowance (better give as reimbursement to save tax)
Child Hostel Allowance (better give as reimbursement to save tax)
City Compensatory Allowance
Conveyance Allowance
House Rent Allowance
Leave Travel Allowance ( better give as reimbursement upto a maiximum of 15,000/- to save tax)
Lunch Allowance
Medical reimbursement to a maximium of 15,000/ (otherwise it will go in tax)
Newspaper allowance (better give as reimbursement to save tax)
Special Allowance
Gift voucher
Club membership (save tax)
You can also add :
1. Uniform Maintenance
2. Professional Enrichment Allowance
3. Entertaintment (Reimbursement) etc.,
4. Vehicle Allowance
5. Phone Allowance
1.Net Pay: Is the total take home every month after all deductions like PF, SA, Gratuity, PT or FBT..
2.Gross Pay: Is the total Pay per month EXCLUDING deductions.
3.CTC (Cost To Company) - Includes all pay components, fixed or promised variable pays, Bonus, Cost implication of all benefits to the company rendered towards the employee.
Please find below a salary structure of XYZ company clearly indicative of components
Basic Salary
House Rent Allowance
Conveyance Allowance
Any other Allowance or Salary components
Gross Total Salary
Less: Deductions
Professional Tax/ TDS, if applicable
Net Total Salary
Gross Salary
Insurance
Medical Reimbursements
Transportation
Club Membership, Health Spa Discount Coupons & Vouchers
Cost To Company (CTC)
Please let me know if the same was usefull and kindly rate the information.
Regards
Swapneel
From Singapore, Singapore
Basic Salary
Commissions/Incentives
Bonus
Dearness allowance
Child Education Allowance (better give as reimbursement to save tax)
Child Hostel Allowance (better give as reimbursement to save tax)
City Compensatory Allowance
Conveyance Allowance
House Rent Allowance
Leave Travel Allowance ( better give as reimbursement upto a maiximum of 15,000/- to save tax)
Lunch Allowance
Medical reimbursement to a maximium of 15,000/ (otherwise it will go in tax)
Newspaper allowance (better give as reimbursement to save tax)
Special Allowance
Gift voucher
Club membership (save tax)
You can also add :
1. Uniform Maintenance
2. Professional Enrichment Allowance
3. Entertaintment (Reimbursement) etc.,
4. Vehicle Allowance
5. Phone Allowance
1.Net Pay: Is the total take home every month after all deductions like PF, SA, Gratuity, PT or FBT..
2.Gross Pay: Is the total Pay per month EXCLUDING deductions.
3.CTC (Cost To Company) - Includes all pay components, fixed or promised variable pays, Bonus, Cost implication of all benefits to the company rendered towards the employee.
Please find below a salary structure of XYZ company clearly indicative of components
Basic Salary
House Rent Allowance
Conveyance Allowance
Any other Allowance or Salary components
Gross Total Salary
Less: Deductions
Professional Tax/ TDS, if applicable
Net Total Salary
Gross Salary
Insurance
Medical Reimbursements
Transportation
Club Membership, Health Spa Discount Coupons & Vouchers
Cost To Company (CTC)
Please let me know if the same was usefull and kindly rate the information.
Regards
Swapneel
From Singapore, Singapore
When Gratuity is included as a part of CTC, it should be paid along with final settlement, if an employee leaves the organization before the completion of 5 years of service which makes him / her eligible to receive gratuity as per Gratuity Act.
If it is not included in CTC, liability for paying gratuity is as per Act, i.e, completion of 5 years.
From India, Pune
If it is not included in CTC, liability for paying gratuity is as per Act, i.e, completion of 5 years.
From India, Pune
It appears that our learned friends are not looking the statutory part of gratuty. Gratuty is a conditional payment. The employee is ENTITLED for gratuity on completion of legally stipulated period of 5 years. In other words the employee will not get gratuty if he works less than the stipulated period in the gratuty act. Then how can gratuty be a part of CTC. I feel it should not be added in the CTC.
The same logic may be applied for bonus whose basic is below Rs 10000/ pm while calculating CTC.
Your reactions please
L N Murty
Corporate head- HR
GTN Industries Limited
Hyderabad
The same logic may be applied for bonus whose basic is below Rs 10000/ pm while calculating CTC.
Your reactions please
L N Murty
Corporate head- HR
GTN Industries Limited
Hyderabad
Dear Mur.Murthy,
Greetings!
I dont agree on your views of Gratuity bcz, if an employee completes the 5 years, it becomes liablity for the company to pay him/her Gratuity so, directly it becomes the part of Cost to the company. Company is going to pay the Gratuity, nobody else will. Thus, you may count it as a part of CTC.
Cost to company means each and every penny which is spent behind the employee.
Your views pls.!
Gambhir
From India, Mundra
Greetings!
I dont agree on your views of Gratuity bcz, if an employee completes the 5 years, it becomes liablity for the company to pay him/her Gratuity so, directly it becomes the part of Cost to the company. Company is going to pay the Gratuity, nobody else will. Thus, you may count it as a part of CTC.
Cost to company means each and every penny which is spent behind the employee.
Your views pls.!
Gambhir
From India, Mundra
Hi,
I refer to the observations of Mr Murthy. If gratuity, bonus, provident fund etc, which come under statutory provisions, are not included in CTC, the management will have to pay these as per statute. However, if management includes these in CTC, it only means that the management is agreeing to give the benefits as mentioned in the appointment letter.The employee as such, cannot be denied the benefit simply because he has not completed the qualifying service. To guard against this, it is advisable to mention against such payment "subject to eligibility under the relevent Act".
In one case the employer had included 20% bonus in CTC. When the employee was paid at lower percentage on the ground of lossess, he challanged it saying that the company having agreed to pay 20% cannot go back on the commitment.
The legal opinion was that the terms are contractual in nature and must be implemented.
It is therefore safe for the management to say "subject to eligibility".
Cyril
From India, Nagpur
I refer to the observations of Mr Murthy. If gratuity, bonus, provident fund etc, which come under statutory provisions, are not included in CTC, the management will have to pay these as per statute. However, if management includes these in CTC, it only means that the management is agreeing to give the benefits as mentioned in the appointment letter.The employee as such, cannot be denied the benefit simply because he has not completed the qualifying service. To guard against this, it is advisable to mention against such payment "subject to eligibility under the relevent Act".
In one case the employer had included 20% bonus in CTC. When the employee was paid at lower percentage on the ground of lossess, he challanged it saying that the company having agreed to pay 20% cannot go back on the commitment.
The legal opinion was that the terms are contractual in nature and must be implemented.
It is therefore safe for the management to say "subject to eligibility".
Cyril
From India, Nagpur
Dear Gambhir,
The salary structure will go as follows:
Basic Salary: 30 % - 50% of the CTC (Cost to Company)
HRA: 50% of Basic
Dearness Allowance: Most Company Will not have this parameter
This (D.A) will be alloted by the Government
D.A is fully taxable
Transport Allowance: Upto 8000/month is not taxable
Telephone Charges: Fully Taxable
Deputation Allowance: Completely Taxable
Annual Medial reimbursement: Rs.15,000/-
Gross Salary + Statuory like PF = CTC
Gross - Deductions = Take Home
Hope this will help you
Best Regards
Isaac Patturaja
From India, Madras
The salary structure will go as follows:
Basic Salary: 30 % - 50% of the CTC (Cost to Company)
HRA: 50% of Basic
Dearness Allowance: Most Company Will not have this parameter
This (D.A) will be alloted by the Government
D.A is fully taxable
Transport Allowance: Upto 8000/month is not taxable
Telephone Charges: Fully Taxable
Deputation Allowance: Completely Taxable
Annual Medial reimbursement: Rs.15,000/-
Gross Salary + Statuory like PF = CTC
Gross - Deductions = Take Home
Hope this will help you
Best Regards
Isaac Patturaja
From India, Madras
I agree with your view.The liability for gratuity will come only on completion of the required period of service ie,- 5 years under the act and the employee will not get any gratuity if he is leaving before five years. Thus the employee will be loosing that much money set aside for gratuity in his CTC. Will the managements pay the total money set aside against gratuity at the time of leaving? I don't think any managment will pay the accrued amount of gratuty to the employee in case he leaves before completion of five years
Thanks
L N Murty
Thanks
L N Murty
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