Hi,
This is an interesting question: whether the inclusion of gratuity in CTC would make an employer liable for payment if an employee leaves the organization before fulfilling the eligibility criteria under the Payment of Gratuity Act.
I believe this question requires an in-depth study. In my view, if an employer has not specifically mentioned 'gratuity' as per the Payment of Gratuity Act in the CTC, an employee can claim this as a simple contractual obligation. The employee may argue that it is a part of their salary that was negotiated and agreed upon at the time of appointment. Under the contractual obligation, the employee has the right to leave the employment, or the contract can be terminated by the employer. In this circumstance, the employer cannot refuse to pay the gratuity amount even if the employee has not completed five years of service.
The situation would change if the employer specifically mentions 'gratuity' as per the Payment of Gratuity Act in the CTC.
I am open to correction. However, I believe one can raise the above plea and legally contest it.
Cyril
Cyril
From India, Nagpur
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27This is an interesting question: whether the inclusion of gratuity in CTC would make an employer liable for payment if an employee leaves the organization before fulfilling the eligibility criteria under the Payment of Gratuity Act.
I believe this question requires an in-depth study. In my view, if an employer has not specifically mentioned 'gratuity' as per the Payment of Gratuity Act in the CTC, an employee can claim this as a simple contractual obligation. The employee may argue that it is a part of their salary that was negotiated and agreed upon at the time of appointment. Under the contractual obligation, the employee has the right to leave the employment, or the contract can be terminated by the employer. In this circumstance, the employer cannot refuse to pay the gratuity amount even if the employee has not completed five years of service.
The situation would change if the employer specifically mentions 'gratuity' as per the Payment of Gratuity Act in the CTC.
I am open to correction. However, I believe one can raise the above plea and legally contest it.
Cyril
Cyril
From India, Nagpur
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Dear Ajay,
If gratuity is included in your CTC, then the employer has to pay the gratuity to the resigned employee even if he leaves within 5 years. It is specified in the appointment letter with respect to gratuity, whether to be paid only after completion of 5 years or it is mentioned in the salary structure, i.e., CTC.
In my company, gratuity is included in CTC. It is calculated as 5% of Basic.
Regards,
Nimish Joshi
From India, Mumbai
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If gratuity is included in your CTC, then the employer has to pay the gratuity to the resigned employee even if he leaves within 5 years. It is specified in the appointment letter with respect to gratuity, whether to be paid only after completion of 5 years or it is mentioned in the salary structure, i.e., CTC.
In my company, gratuity is included in CTC. It is calculated as 5% of Basic.
Regards,
Nimish Joshi
From India, Mumbai
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Hi,
As far as my knowledge is concerned, gratuity cannot be part of CTC. It is not a deductible amount from CTC; rather, it is an additional burden on the employer's part, which has to be paid to the employee, and the time limit is 5 years with no exemptions.
Please correct me if I am wrong.
Regards,
Sharad
From India
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As far as my knowledge is concerned, gratuity cannot be part of CTC. It is not a deductible amount from CTC; rather, it is an additional burden on the employer's part, which has to be paid to the employee, and the time limit is 5 years with no exemptions.
Please correct me if I am wrong.
Regards,
Sharad
From India
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I would like to second the opinions of two of my colleagues, namely HR Singh and Santosh Kumar. Both are correct.
Today, many companies are paying the gratuity component every year rather than at the end of five years as stipulated by the law.
Surya
From India, Delhi
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Today, many companies are paying the gratuity component every year rather than at the end of five years as stipulated by the law.
Surya
From India, Delhi
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Dear Ajee,
With regard to the above-mentioned, there is no need to request payment for gratuity before completing five years of service. The component shown in the CTC is part of the employer's contribution. No employee is eligible to claim against it before the specified years in the respective law. Yes, only in the case of demise can you go ahead with a gratuity claim.
CTC represents the actual earnings of employees from the company and the employer's contribution, so portraying gratuity is not an issue, but it is impossible to claim before the fifth year.
Regards,
Christopher.
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With regard to the above-mentioned, there is no need to request payment for gratuity before completing five years of service. The component shown in the CTC is part of the employer's contribution. No employee is eligible to claim against it before the specified years in the respective law. Yes, only in the case of demise can you go ahead with a gratuity claim.
CTC represents the actual earnings of employees from the company and the employer's contribution, so portraying gratuity is not an issue, but it is impossible to claim before the fifth year.
Regards,
Christopher.
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Dear Ajee,
If you are including gratuity in his CTC, that means you have liabilities to pay to the employees. The Act is applicable only after completion of continuous 5 years. So, in case of leaving before 5 years, you have to pay the amount of gratuity which you have shown in his CTC.
Girish
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If you are including gratuity in his CTC, that means you have liabilities to pay to the employees. The Act is applicable only after completion of continuous 5 years. So, in case of leaving before 5 years, you have to pay the amount of gratuity which you have shown in his CTC.
Girish
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Dear,
How do you include Gratuity in the appointment letter to signify the payment terms? Nowadays, it has become customary to display the statutory payments made to employees as part of the CTC, where they are placed under the appointment terms. In my opinion, this practice is incorrect.
If you include it in the appointment letter, it falls under the law of the contract, and employees can request Gratuity claims and even PF claims since the amounts shown in the Gratuity column often exceed the statutory provisions in most cases.
To be on the safe side, even if statutory payments are considered in the CTC, they should be accurately worded when included in the appointment letter.
Regards,
Vinmind
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How do you include Gratuity in the appointment letter to signify the payment terms? Nowadays, it has become customary to display the statutory payments made to employees as part of the CTC, where they are placed under the appointment terms. In my opinion, this practice is incorrect.
If you include it in the appointment letter, it falls under the law of the contract, and employees can request Gratuity claims and even PF claims since the amounts shown in the Gratuity column often exceed the statutory provisions in most cases.
To be on the safe side, even if statutory payments are considered in the CTC, they should be accurately worded when included in the appointment letter.
Regards,
Vinmind
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Dear All,
Let me first congratulate all of you for having a good discussion on the Cite HR forum.
I see this issue as an understanding issue and a company's perspective issue.
1. As everybody is aware, gratuity is payable under the Payment of Gratuity Act 1972. It can be paid based on a certain formula after the completion of 5 years of continuous service.
2. It is the company's choice to include or exclude it in CTC calculations. If any organization includes it in CTC, it is important to understand what cost to be taken. Some companies take it at 5% of basic wages (on which PF is deducted), some take it at 8% of basic wages.
3. Another method to calculate the cost of gratuity for CTC calculation is to take the actual cost incurred by the employer for insuring (if insured) the benefit of gratuity (which the employer pays to any insurance company every year as the premium of the insurance policy). This cost the employer doesn't save even if any employee leaves the organization before 5 years. This can be justified to any employee if he claims gratuity before completing 5 years of service on the pretext of CTC basis.
4. The employer is not legally bound to pay gratuity before the completion of 5 years of continuous service. Therefore, the employee cannot claim it, even if it is being included in CTC.
5. In the end, everything depends upon the company's policy. You can pay anything you want or negotiate. No law stops you from paying more than statutory norms.
Regards,
Sameer
From India, Calcutta
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Let me first congratulate all of you for having a good discussion on the Cite HR forum.
I see this issue as an understanding issue and a company's perspective issue.
1. As everybody is aware, gratuity is payable under the Payment of Gratuity Act 1972. It can be paid based on a certain formula after the completion of 5 years of continuous service.
2. It is the company's choice to include or exclude it in CTC calculations. If any organization includes it in CTC, it is important to understand what cost to be taken. Some companies take it at 5% of basic wages (on which PF is deducted), some take it at 8% of basic wages.
3. Another method to calculate the cost of gratuity for CTC calculation is to take the actual cost incurred by the employer for insuring (if insured) the benefit of gratuity (which the employer pays to any insurance company every year as the premium of the insurance policy). This cost the employer doesn't save even if any employee leaves the organization before 5 years. This can be justified to any employee if he claims gratuity before completing 5 years of service on the pretext of CTC basis.
4. The employer is not legally bound to pay gratuity before the completion of 5 years of continuous service. Therefore, the employee cannot claim it, even if it is being included in CTC.
5. In the end, everything depends upon the company's policy. You can pay anything you want or negotiate. No law stops you from paying more than statutory norms.
Regards,
Sameer
From India, Calcutta
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Dear,
This mail is not related to any personal comments or remarks, so please take it as a point of discussion.
Correct me if I'm wrong. I think Gratuity contribution is borne by the Employer, not by the Employee, and that it is 4.81% of the basic, not 5%. Is it correct or not? Please let me have the view of the Seniors.
From India, Mumbai
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This mail is not related to any personal comments or remarks, so please take it as a point of discussion.
Correct me if I'm wrong. I think Gratuity contribution is borne by the Employer, not by the Employee, and that it is 4.81% of the basic, not 5%. Is it correct or not? Please let me have the view of the Seniors.
From India, Mumbai
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SBT Vs Asst. Labour Commissioner- Gratuity dismissed employee-LTS.PD F
FORM I(Application for Gratuity by an employee).doc