It is improper to show gratuity amount as a part of CTC with the following reasons:
1. There is no monthly outgo payment towards gratuity for any employee.
2. Gratuity is payable after 5 years of continuous service based on the last drawn salary. Therefore, how can the employer project CTC amount based on the current running salary?
3. If an employer includes gratuity contribution as part of the salary (CTC), then it should be paid to the employee upon separation before completion of 5 years of service. The contribution shown as part of CTC is not payable by the employer to the gratuity fund.
4. Companies benefit from tax advantages on the accrued gratuity amount.
5. In contrast to PF and ESI contributions, which are monthly outgo payments from eligible employees from the beginning, the gratuity amount does not need to be paid to the Trust or LIC every month. Therefore, displaying the gratuity amount as part of the CTC in employees' offers or appraisals is not justified.
Regards,
Suresh
From India, Thane
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2751. There is no monthly outgo payment towards gratuity for any employee.
2. Gratuity is payable after 5 years of continuous service based on the last drawn salary. Therefore, how can the employer project CTC amount based on the current running salary?
3. If an employer includes gratuity contribution as part of the salary (CTC), then it should be paid to the employee upon separation before completion of 5 years of service. The contribution shown as part of CTC is not payable by the employer to the gratuity fund.
4. Companies benefit from tax advantages on the accrued gratuity amount.
5. In contrast to PF and ESI contributions, which are monthly outgo payments from eligible employees from the beginning, the gratuity amount does not need to be paid to the Trust or LIC every month. Therefore, displaying the gratuity amount as part of the CTC in employees' offers or appraisals is not justified.
Regards,
Suresh
From India, Thane
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Dear Colleagues,
Since gratuity is a cost to the company and a legal obligation, it is perfectly alright to show it as a part of CTC just like PF and ESI. There may not be a monthly outgo, but funding provisions have to be made in the books of accounts for its future liability.
However, what is condemnable is the deduction by the employer towards gratuity from employees' salary every month. It is illegal, and if it is not stopped forthwith, the employer should be brought before the authorities for a serious breach of the law and a punishable offense.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Since gratuity is a cost to the company and a legal obligation, it is perfectly alright to show it as a part of CTC just like PF and ESI. There may not be a monthly outgo, but funding provisions have to be made in the books of accounts for its future liability.
However, what is condemnable is the deduction by the employer towards gratuity from employees' salary every month. It is illegal, and if it is not stopped forthwith, the employer should be brought before the authorities for a serious breach of the law and a punishable offense.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Dear Hemlata,
There are a lot of opinions on your query. Let us understand the mathematics behind TCTC/CTC.
Let us consider the TCTC/CTC per annum is INR 3,60,000/- i.e per month INR 30,000/-. Let us also consider the components included in CTC are - (Basic, HRA, Allowances = Monthly gross) + Employer's portion of PF & ESI (if applicable) + Statutory Bonus (if applicable) + Gratuity + Any other payment proposed to pay the employee.
Therefore, to arrive at the monthly gross, it is essential to deduct other components i.e from 30,000/- it will be required to deduct Employer's portion of PF & ESI, Statutory Bonus, Gratuity & Any other payment.
Now, we will arrive at Basic, HRA & Allowances. When we offer employment, nowadays most employers are showing TCTC/CTC. There are organizations that process payroll from CTC, which is technically wrong. Offering CTC is one part, but when we process payroll, it should be from the monthly gross; otherwise, confusion will continue.
The offer of the organization may be (Basic + HRA + Allowances = Monthly gross) * 12 = Yearly gross + Yearly Employer's contribution to PF & ESI + Yearly Statutory Bonus + Yearly Gratuity Liability + Yearly any other liability. Payroll will be on the basis of monthly gross only.
Trust this will satisfy your query. For further clarification, you may contact me.
Thanks & Regards,
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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There are a lot of opinions on your query. Let us understand the mathematics behind TCTC/CTC.
Let us consider the TCTC/CTC per annum is INR 3,60,000/- i.e per month INR 30,000/-. Let us also consider the components included in CTC are - (Basic, HRA, Allowances = Monthly gross) + Employer's portion of PF & ESI (if applicable) + Statutory Bonus (if applicable) + Gratuity + Any other payment proposed to pay the employee.
Therefore, to arrive at the monthly gross, it is essential to deduct other components i.e from 30,000/- it will be required to deduct Employer's portion of PF & ESI, Statutory Bonus, Gratuity & Any other payment.
Now, we will arrive at Basic, HRA & Allowances. When we offer employment, nowadays most employers are showing TCTC/CTC. There are organizations that process payroll from CTC, which is technically wrong. Offering CTC is one part, but when we process payroll, it should be from the monthly gross; otherwise, confusion will continue.
The offer of the organization may be (Basic + HRA + Allowances = Monthly gross) * 12 = Yearly gross + Yearly Employer's contribution to PF & ESI + Yearly Statutory Bonus + Yearly Gratuity Liability + Yearly any other liability. Payroll will be on the basis of monthly gross only.
Trust this will satisfy your query. For further clarification, you may contact me.
Thanks & Regards,
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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Hi,
Yes, it is legal. Gratuity is a part of CTC (Cost to Company). A few companies have a Gratuity fund with banks where they deposit gratuity for all employees. Gratuity can be deducted from an employee's CTC but not gross salary. Most companies nowadays prefer keeping everything in CTC so they know their total cost involved with an employee.
Hope this helps.
Regards,
Shweta Gehlot
From India, Delhi
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Yes, it is legal. Gratuity is a part of CTC (Cost to Company). A few companies have a Gratuity fund with banks where they deposit gratuity for all employees. Gratuity can be deducted from an employee's CTC but not gross salary. Most companies nowadays prefer keeping everything in CTC so they know their total cost involved with an employee.
Hope this helps.
Regards,
Shweta Gehlot
From India, Delhi
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In simplified terms Gratuity should pay (bear cost) by employer/buisiness owner/company/organisation. It should be cost to company (employer) and should not be cost to employee. Mohan Nair.
From India, Mumbai
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From India, Mumbai
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Dear Hemlata, Employer can show this amount in employee’s CTC because this is a part of company expenses for Employee Regards CP Singh
From India, Noida
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From India, Noida
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Dear colleagues,
Those forum members who have opined about gratuity being part of CTC are missing the core point of the query. The issue is the employer has deducted from the salary of the employees an amount towards the gratuity, and the query is posed whether this is alright as per the Gratuity Act. Myself and several others have categorically stated that this is illegal.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Those forum members who have opined about gratuity being part of CTC are missing the core point of the query. The issue is the employer has deducted from the salary of the employees an amount towards the gratuity, and the query is posed whether this is alright as per the Gratuity Act. Myself and several others have categorically stated that this is illegal.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Dear Mr. Vinayak,
Request you to read my earlier posting properly. Gratuity is a part of CTC/TCTC or not is not the problem. Because CTC/TCTC has no legal stand.
It is the problem of processing payroll. If any organization starts processing payroll and shows it on the payslip from the monthly CTC/TCTC level and then deducts the items included in CTC along with Gratuity, it will be a technical problem to convince any statutory authority. CTC is an internal matter of the organization. If the same organization processes payroll from the monthly gross after internally adjusting all deductions from CTC including Gratuity, then the question of deducting Gratuity from salary will not arise.
Trust this will satisfy your query.
Thanks & Regds., S K Bandyopadhyay
From India, New Delhi
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Request you to read my earlier posting properly. Gratuity is a part of CTC/TCTC or not is not the problem. Because CTC/TCTC has no legal stand.
It is the problem of processing payroll. If any organization starts processing payroll and shows it on the payslip from the monthly CTC/TCTC level and then deducts the items included in CTC along with Gratuity, it will be a technical problem to convince any statutory authority. CTC is an internal matter of the organization. If the same organization processes payroll from the monthly gross after internally adjusting all deductions from CTC including Gratuity, then the question of deducting Gratuity from salary will not arise.
Trust this will satisfy your query.
Thanks & Regds., S K Bandyopadhyay
From India, New Delhi
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Dear Mr. Bandopadhyay,
Let me correct you that I have no query, and I have given my views on the original poster's query. Some colleagues have digressed and opined on whether gratuity is part of CTC, which is not what the querist wants.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Let me correct you that I have no query, and I have given my views on the original poster's query. Some colleagues have digressed and opined on whether gratuity is part of CTC, which is not what the querist wants.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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