I agree on the Rs 10000 bit. However there are many aspects that are considered in the CTC.
First of all most MNC's (and Im sure every other Industry too) have 2 CTC figures.
a) One that is declared to the employee and includes his salary, perks and other reimbursable components
b) an internal CTC that considers many other items that are not declared but are incured as a result of hiring the employee. These may range from Uniform Expenses, safety equipment (shoes, eye protection, masks and consumables), water per person per month, electricity, assets like desktops software licenses, file storege space, furniture, power consumption, food allowances, tea, coffee and buiscuits. THis CTC is exculsive to HR and Finance and not disclosed. this goes towwards budgeting for operational costs.
Now since gratuity is not reimbursable to the employee on an annual basis and in the employees perspective is only a "terminal" benifit, mention of this as a one liner in the Appointment letter would be sufficient therey indicating the 5 year period. Inclusion of the same in annual declared CTC and specifically before the completion of 5 years only raises confusion. This expenses should be left out of the declared CTC. This would avoid confusion and be ethically right to the employee.
Items in CTC are reimbursable to the employee annually (annual financial statement closure). If a component of Gratuity is added in the CTC of the employee who has not completed 5 years it means that
a) this amount is not being paid to him and is treated as a deduction.
b) If the employee does not complete 5 years the amount should be paid back to him as ex-gratia amount not withstanding the Gratuity act as the Gratuity act is not applicable to him. This is ethical because the amount actually is due to the employee by way of annual deductions from his CTC.
However if Gratuity is not mentioned in the employees CTC, he has no right in demanding that amount as terminal beinfit until the completion of 5 continious year service.
These are my opinions and I hope someone who is profficient in labor law will share my views.
From India, Pune
1First of all most MNC's (and Im sure every other Industry too) have 2 CTC figures.
a) One that is declared to the employee and includes his salary, perks and other reimbursable components
b) an internal CTC that considers many other items that are not declared but are incured as a result of hiring the employee. These may range from Uniform Expenses, safety equipment (shoes, eye protection, masks and consumables), water per person per month, electricity, assets like desktops software licenses, file storege space, furniture, power consumption, food allowances, tea, coffee and buiscuits. THis CTC is exculsive to HR and Finance and not disclosed. this goes towwards budgeting for operational costs.
Now since gratuity is not reimbursable to the employee on an annual basis and in the employees perspective is only a "terminal" benifit, mention of this as a one liner in the Appointment letter would be sufficient therey indicating the 5 year period. Inclusion of the same in annual declared CTC and specifically before the completion of 5 years only raises confusion. This expenses should be left out of the declared CTC. This would avoid confusion and be ethically right to the employee.
Items in CTC are reimbursable to the employee annually (annual financial statement closure). If a component of Gratuity is added in the CTC of the employee who has not completed 5 years it means that
a) this amount is not being paid to him and is treated as a deduction.
b) If the employee does not complete 5 years the amount should be paid back to him as ex-gratia amount not withstanding the Gratuity act as the Gratuity act is not applicable to him. This is ethical because the amount actually is due to the employee by way of annual deductions from his CTC.
However if Gratuity is not mentioned in the employees CTC, he has no right in demanding that amount as terminal beinfit until the completion of 5 continious year service.
These are my opinions and I hope someone who is profficient in labor law will share my views.
From India, Pune
This point had been raised earlier in this forum and clarification given. You may like to refer to the same. If the employee is leaving before completion of five years, he is entitled to recieve the entire amount deducted by the employer.
Cyril
From India, Nagpur
Cyril
From India, Nagpur
Thanks for clarifying it Cyril. however at the time of posting I was unable to find a similar post that was decisively on this subject. Most of them concentrated on applicability of the same when the employee has forked for under 5 years. None of them were specific to the annual deduction of Gratuity from the employees CTC from Year 1.
From India, Pune
From India, Pune
I am showing these comments to my HR manager but he is saying that this is a company policy please tell me what I can do.
I am also saying him that according to our offer letter & salary slip we can take him to the court he says that it is not possible because it is a part of CTC.
I want to know that there is any law if company did not remburse our gratuity amount on leaving time / terminated time, which can help us to casefile on company?
From India, Ghaziabad
I am also saying him that according to our offer letter & salary slip we can take him to the court he says that it is not possible because it is a part of CTC.
I want to know that there is any law if company did not remburse our gratuity amount on leaving time / terminated time, which can help us to casefile on company?
From India, Ghaziabad
Hi,
This issue was raised in this forum and we had given our opinion.
It has been rightly advised that if the contribution to payment of gratuity is being shown in CTC and the employee quits before the eligibility period of five years, the amount so deducted must be refunded by the employer. However, if the employer, incorporates a clause "subject to eligibility under the Payment of Gratuity Act", then the employee may not be able to claim this amount. In this case the employer can take a plea that while finalizing the package, this was made clear to the employee i.e he will be entitled to the benefit on completion of the eligibility period of 5 years.
This is based on our discussions with the Counsel.
Cyril
From India, Nagpur
This issue was raised in this forum and we had given our opinion.
It has been rightly advised that if the contribution to payment of gratuity is being shown in CTC and the employee quits before the eligibility period of five years, the amount so deducted must be refunded by the employer. However, if the employer, incorporates a clause "subject to eligibility under the Payment of Gratuity Act", then the employee may not be able to claim this amount. In this case the employer can take a plea that while finalizing the package, this was made clear to the employee i.e he will be entitled to the benefit on completion of the eligibility period of 5 years.
This is based on our discussions with the Counsel.
Cyril
From India, Nagpur
There is nothing wrong in showing gratuity component in CTC provided the employee is informed of the same prior to adding this as a component in CTC. This will enable the employee to bargain about his pay in advantage to him/her, In such circumstances adding Gratuity component in ctc is fair.
The other ethical and fair way is to pay the grauity component in case the employee leaves the employment before completing the eligibility period.
Nowadays many employers are taking group gratuity policy.Care to be taken to incorporate relavant clause/condition to pay gratuity even the empoloyee is not elgible to receive gratuity while leaving the service if gratuity is shown as part of ctc.
From India, Hyderabad
The other ethical and fair way is to pay the grauity component in case the employee leaves the employment before completing the eligibility period.
Nowadays many employers are taking group gratuity policy.Care to be taken to incorporate relavant clause/condition to pay gratuity even the empoloyee is not elgible to receive gratuity while leaving the service if gratuity is shown as part of ctc.
From India, Hyderabad
The current concept of CTC made every thing clear. It is total cost for the company with reference to recruited employee. Gratuity is one of it. when an employee leaves company before eligibility of Gratuity, company need not give the amount shown as part of CTC to left employee.
It is a concept only. As Accounts are prepared as " Going Concern Aspect"
it is concept just to show employee that it would be cost to company.
Actually speaking nothing is deducted from the payable amount.So employee claiming it back is not proper. It is not advisable to company to pay back that ficticious amount just shown as part of CTC , and it is property of employee only when he continues to be in service.
From India, Hyderabad
It is a concept only. As Accounts are prepared as " Going Concern Aspect"
it is concept just to show employee that it would be cost to company.
Actually speaking nothing is deducted from the payable amount.So employee claiming it back is not proper. It is not advisable to company to pay back that ficticious amount just shown as part of CTC , and it is property of employee only when he continues to be in service.
From India, Hyderabad
Dear VSChalla,
Its simple that untill gratuity is not paid, how a company would incur the cost...or how it would be a cost to company...its just that employee is shown big amount but in actual it is gross-gratuity (and others) that he is getting.....may be it helps company in getting tax benefits but confuses a lot to employee in referrence to his/her tax planning.
Somewhere upper i was reading that employer needs to submit this amount to LIC...does LIC keeps it for no interest giving on it & if an employee leaves before the 5 years..what happens to that money deposited in employee's name..whether employer is refunded & if this is the case..it should be the entitlement of employee,not of employer? what do u all say..???
From India, Vadodara
Its simple that untill gratuity is not paid, how a company would incur the cost...or how it would be a cost to company...its just that employee is shown big amount but in actual it is gross-gratuity (and others) that he is getting.....may be it helps company in getting tax benefits but confuses a lot to employee in referrence to his/her tax planning.
Somewhere upper i was reading that employer needs to submit this amount to LIC...does LIC keeps it for no interest giving on it & if an employee leaves before the 5 years..what happens to that money deposited in employee's name..whether employer is refunded & if this is the case..it should be the entitlement of employee,not of employer? what do u all say..???
From India, Vadodara
i agree with you Mahendrasingh. The CTC is an agreement between employer and employee. If an amount is specified in the CTC for the first 5 years, the same should be paid to the employee notwithstanding the gratuity act.
From India, Pune
From India, Pune
Thanks All,
We have mulled over this issue for long and gets success in taking some substance out. But i really miss to somebody share practical experience on this particular situation.
Though legal/labour provisions needs to first understand but i think sharing of practical knowledge will help more as on this forum and practically on this issue, more people desirous to hear would be the victims (i mean employee's and less others) and so in that way talking in real sense would be more useful.
I want people add more clearification on this by sharing the practical cases and not legal provisions (may just mention the concept) otherwise it passes over to many heads.
Above, Mr. VSChalla expains why CTC generally includes gratuity components as he says that " It is a concept only. As Accounts are prepared as " Going Concern Aspect" it is concept just to show employee that it would be cost to company.
I am agree with him that it [B]would be a cost to company but from here it also becomes clear that since company thinks that later on it would be a cost to company as company will have to pay that amount, and so keeping that in mind company may design its appointment letters to CTC include gratuity as deductible amount and show to collecting the same in advance from employee.Justifibale.
But another think which is also true and we should all agree with, is that employer deposits this amount with LIC, i mean there is actual fund transfer between company and LIC on behalf of empolyee.
So when employee stays for five years then same is refunded to him in the form of gratuity fund and thus is justifibale to so show in CTC and deduct in advance.
but what if employee leaves before5 years and company has deducted but same is not refunded to employee.
See everybody should agree and it is true that a gratuity component is cut from employee's CTC/payable amount and same is deposited to and managed by LIC, will it justify to just say that it is just a concept shown to employee and does not have real value which employee can not claim. When an amount is deposited to LIC in name of an employee under gratuity and there has been actual fund transfer in his/her name how can it just be a concept. why this concept is required in CTC which never gets physical shape.
Since employee is shown only the real cost to company which he is paid, why such unreal component forms part of his/her CTC, and if forms same should be claimable.
If company gets that fund back that certainly that is a fraud.
I would really appreaciate (as that will help me) if somebody will share practical experiance on this particular situation, including views on procedure of ex gratia payment.
Thanks
From India, Vadodara
We have mulled over this issue for long and gets success in taking some substance out. But i really miss to somebody share practical experience on this particular situation.
Though legal/labour provisions needs to first understand but i think sharing of practical knowledge will help more as on this forum and practically on this issue, more people desirous to hear would be the victims (i mean employee's and less others) and so in that way talking in real sense would be more useful.
I want people add more clearification on this by sharing the practical cases and not legal provisions (may just mention the concept) otherwise it passes over to many heads.
Above, Mr. VSChalla expains why CTC generally includes gratuity components as he says that " It is a concept only. As Accounts are prepared as " Going Concern Aspect" it is concept just to show employee that it would be cost to company.
I am agree with him that it [B]would be a cost to company but from here it also becomes clear that since company thinks that later on it would be a cost to company as company will have to pay that amount, and so keeping that in mind company may design its appointment letters to CTC include gratuity as deductible amount and show to collecting the same in advance from employee.Justifibale.
But another think which is also true and we should all agree with, is that employer deposits this amount with LIC, i mean there is actual fund transfer between company and LIC on behalf of empolyee.
So when employee stays for five years then same is refunded to him in the form of gratuity fund and thus is justifibale to so show in CTC and deduct in advance.
but what if employee leaves before5 years and company has deducted but same is not refunded to employee.
See everybody should agree and it is true that a gratuity component is cut from employee's CTC/payable amount and same is deposited to and managed by LIC, will it justify to just say that it is just a concept shown to employee and does not have real value which employee can not claim. When an amount is deposited to LIC in name of an employee under gratuity and there has been actual fund transfer in his/her name how can it just be a concept. why this concept is required in CTC which never gets physical shape.
Since employee is shown only the real cost to company which he is paid, why such unreal component forms part of his/her CTC, and if forms same should be claimable.
If company gets that fund back that certainly that is a fraud.
I would really appreaciate (as that will help me) if somebody will share practical experiance on this particular situation, including views on procedure of ex gratia payment.
Thanks
From India, Vadodara
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