Once the package includes the Gratuity as an indirect benefit of wage component, it is the duty of the employer to pay Gratuity to the employee irrespective of the compliance of the required service of completion of 5 years service as per the Act (Since the employer himself has the commitment to pay Gratuity from day one service of an employee vide package issued to an employee). Is my understanding correct???
From India, Mumbai
25From India, Mumbai
"" Is my understanding correct???""
Sridhar,
Your understanding is incorrect.
Gratuity will be paid only if employee fulfils minimum conditions like 5 years continuous service.r
The fact that gratuity is included in CTC is only accounting understanding that after due period of service this amount will be due to be paid by company on exit of employee.
From India, Pune
Sridhar,
Your understanding is incorrect.
Gratuity will be paid only if employee fulfils minimum conditions like 5 years continuous service.r
The fact that gratuity is included in CTC is only accounting understanding that after due period of service this amount will be due to be paid by company on exit of employee.
From India, Pune
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Therefore, when we study Gratuity aspect juxtaposed with "CTC" and "Payment" it loses the character of CTC (for those not payable having <5 yrs. service). On the other hand, however de facto, gratuity as CTC is only for those completing 5 yrs of continuous service. Hence Gratuity as part of CTC should not be considered at all till completion of 5 yrs. Am I right ?
From India, Bangalore
Therefore, when we study Gratuity aspect juxtaposed with "CTC" and "Payment" it loses the character of CTC (for those not payable having <5 yrs. service). On the other hand, however de facto, gratuity as CTC is only for those completing 5 yrs of continuous service. Hence Gratuity as part of CTC should not be considered at all till completion of 5 yrs. Am I right ?
From India, Bangalore
Dear Sanjeev,
By the term "CTC" we should not restrict our imagination merely on point of view of the HR. CTC (cost to company), as the term reveals is an accounts & finance term that intends to denote commercial accounting of transactions made with reference to the staff & establish matters, rather than any HR activity. For the purpose of HR, the terms of salary, wages, pay & allowances and the emoluments can well be used. The CTC in a company denotes commercial vallues for the purpose of accounting, as the company has to maintain its accounts on commercial pattern for arriving at the true results of profit & loss and assets & liability after shouldering its likely liabilities during and/or after the service period of the employees.
So, with reference to your assumption and question, "deduction towards Payment of Gratuity is legal or illegal? Gratuity becomes payable, if and only if, an employee completes FIVE years of continuous service with organization. If an employee leaves the organization within FIVE years of joining, he is not paid the Gratuity Amount, even though the amount has been deducted from his CTC and kept aside. Do you think deduction made from the TCTC of an employee towards payment of gratuity, is legal or illegal? Is it ethical," I would like to say that gratuity element in CTC is not a deduction, rather a held up amount to show liability that the company has to evenually bear in making payment after the employee actually becomes eligible, as per the law of the land. The said liability gets included every year in the annual accounts of the company to arrive at the true position of its profit and loss on commerical accounting pattern for the purpose of information to its stake holders and the share holders, so that the burden may not affect its revenue and profits in lump in the year of payment. In other words, that is just to facilitate smooth sailing of their funding position and to reveal the real financial health of the company from year to year basis.
So, the question of ethics, legality or deduction of gratuity does not arise when it is concerned with the HR functions or the salary/ wages of the employees, as that denotes a presumptive nominal value for the purpose of funding the operations of the company and to bear when becomes due to be paid. However, if that does not become due to the employee due to his ineligibility that remains as part and parcel of the profits & losses of the company that alsready stand incorporated in the books of accounts of the company.
So, it is quite legal and has no illegality or against ethics. Rather that helps the employee to show his real worth when applying for another job elsewhere.
From India, Delhi
By the term "CTC" we should not restrict our imagination merely on point of view of the HR. CTC (cost to company), as the term reveals is an accounts & finance term that intends to denote commercial accounting of transactions made with reference to the staff & establish matters, rather than any HR activity. For the purpose of HR, the terms of salary, wages, pay & allowances and the emoluments can well be used. The CTC in a company denotes commercial vallues for the purpose of accounting, as the company has to maintain its accounts on commercial pattern for arriving at the true results of profit & loss and assets & liability after shouldering its likely liabilities during and/or after the service period of the employees.
So, with reference to your assumption and question, "deduction towards Payment of Gratuity is legal or illegal? Gratuity becomes payable, if and only if, an employee completes FIVE years of continuous service with organization. If an employee leaves the organization within FIVE years of joining, he is not paid the Gratuity Amount, even though the amount has been deducted from his CTC and kept aside. Do you think deduction made from the TCTC of an employee towards payment of gratuity, is legal or illegal? Is it ethical," I would like to say that gratuity element in CTC is not a deduction, rather a held up amount to show liability that the company has to evenually bear in making payment after the employee actually becomes eligible, as per the law of the land. The said liability gets included every year in the annual accounts of the company to arrive at the true position of its profit and loss on commerical accounting pattern for the purpose of information to its stake holders and the share holders, so that the burden may not affect its revenue and profits in lump in the year of payment. In other words, that is just to facilitate smooth sailing of their funding position and to reveal the real financial health of the company from year to year basis.
So, the question of ethics, legality or deduction of gratuity does not arise when it is concerned with the HR functions or the salary/ wages of the employees, as that denotes a presumptive nominal value for the purpose of funding the operations of the company and to bear when becomes due to be paid. However, if that does not become due to the employee due to his ineligibility that remains as part and parcel of the profits & losses of the company that alsready stand incorporated in the books of accounts of the company.
So, it is quite legal and has no illegality or against ethics. Rather that helps the employee to show his real worth when applying for another job elsewhere.
From India, Delhi
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That apart, apparently there is no legality or illegality in "CTC" as this term finds no place in statute. My worry is about, in a way the illogical gain that an employer would make when gratuity is forfeited from those leaving for < 5 yrs. service (not an indiscipline) which was appropriated from the CTC. Which in other words can be termed as "unjust enrichment".
From India, Bangalore
That apart, apparently there is no legality or illegality in "CTC" as this term finds no place in statute. My worry is about, in a way the illogical gain that an employer would make when gratuity is forfeited from those leaving for < 5 yrs. service (not an indiscipline) which was appropriated from the CTC. Which in other words can be termed as "unjust enrichment".
From India, Bangalore
As I know, Annual CTC is not a legal term. It is designed by the companies to attract & allure the new joinees. Therefore, company go on adding any type of expenditure like gratuity which is tenable on separation after 5 years of continuous service. At the start of the job, no tenure of separation can be decided. Hence, how can we say this is expenditure or accrued expenditure.
I may inform that only actual expenditure incurred is booked in the books. If any amount is booked in books on accrual basis, same is to be released to the concerned person/party before filing of ITR. Hence, no part of the CTC is booked in books of accounts other than actual or accrual. If we examine from income tax view, how amount can be booked for which tenure or limit is not decided. Pls note that gratuity is to be calculated on the basis of last pay drawn.
From India, Panipat
I may inform that only actual expenditure incurred is booked in the books. If any amount is booked in books on accrual basis, same is to be released to the concerned person/party before filing of ITR. Hence, no part of the CTC is booked in books of accounts other than actual or accrual. If we examine from income tax view, how amount can be booked for which tenure or limit is not decided. Pls note that gratuity is to be calculated on the basis of last pay drawn.
From India, Panipat
Nathrao ji, Thanks for your appreciation and endorsing my views, "Rather that helps the employee to show his real worth when applying for another job elsewhere."
From India, Delhi
From India, Delhi
Dear Shri Kumar,
Probably, you are in some misunderstanding about forfeiture of gratuity. Gratuity forfeited in lump at the time when actually becomes due for payment after termination of employee or out of the amount shown in through annual CTC, is one and the same thing, as no change in situation happens in case of forfeiture, as per law., as that is merely an accounting implication. So, there happens no illogical gain whether the forfeiture is at the time of termination or of the accummulated total, as shown in the CTC, when that is in accordance with the Payment of Gratuity Act.
From India, Delhi
Probably, you are in some misunderstanding about forfeiture of gratuity. Gratuity forfeited in lump at the time when actually becomes due for payment after termination of employee or out of the amount shown in through annual CTC, is one and the same thing, as no change in situation happens in case of forfeiture, as per law., as that is merely an accounting implication. So, there happens no illogical gain whether the forfeiture is at the time of termination or of the accummulated total, as shown in the CTC, when that is in accordance with the Payment of Gratuity Act.
From India, Delhi
Dear Shri Gupta,
If CTC is not legal, in any way, it would be nice on your part to quote some section of the Act according to which that is illegal. That may not only enrich my lnowledge, rather would enlighten all other members of the forum also.
For your kind information, CTC has nothing to do with the Payment of Gratuity Act. So, you cannot expect any mention of the term "CTC" in the law pertaining to the Payment of Gratuity. The Act provides deals with the entitlement of the employees for the payment of gratuity and the penal provisions for violation of the law. Had the CTC been linked to the Payment of Gratuity Act that would definitely have defined the term CTC and the penal provisions, if the CTC would have been illegal in any manner. So, there is no use of raising any controversy about the accounting term "CTC" vis-a-vis the provisions of the Payment of Gratuity Act.
We must understand that both the HR & Accounting functions of any commercial organisation are quite distinct. While the Accounting department cannot raise any finger on the decision of the HR in payment or forfeiture of gratuity, the HR cannot also interfere in the functioning and principles of accouting of transactions by the Accounts Department.
From India, Delhi
If CTC is not legal, in any way, it would be nice on your part to quote some section of the Act according to which that is illegal. That may not only enrich my lnowledge, rather would enlighten all other members of the forum also.
For your kind information, CTC has nothing to do with the Payment of Gratuity Act. So, you cannot expect any mention of the term "CTC" in the law pertaining to the Payment of Gratuity. The Act provides deals with the entitlement of the employees for the payment of gratuity and the penal provisions for violation of the law. Had the CTC been linked to the Payment of Gratuity Act that would definitely have defined the term CTC and the penal provisions, if the CTC would have been illegal in any manner. So, there is no use of raising any controversy about the accounting term "CTC" vis-a-vis the provisions of the Payment of Gratuity Act.
We must understand that both the HR & Accounting functions of any commercial organisation are quite distinct. While the Accounting department cannot raise any finger on the decision of the HR in payment or forfeiture of gratuity, the HR cannot also interfere in the functioning and principles of accouting of transactions by the Accounts Department.
From India, Delhi
Dear Sridharan,
By your statement, do you really mean that the employer becomes duty bound to pay the gratuity even if that violates the law of the land on the payment of gratuity, if the employer has included the element of gratuity in the CTC of an employee, and also that to discharge the so called duty the employer is totally free to violate any law of the land?
If so, you please like to quote the appropriate section of the relevant law on that issue. That may help me enhance my knowledge, including that of other members of the forum.
From India, Delhi
By your statement, do you really mean that the employer becomes duty bound to pay the gratuity even if that violates the law of the land on the payment of gratuity, if the employer has included the element of gratuity in the CTC of an employee, and also that to discharge the so called duty the employer is totally free to violate any law of the land?
If so, you please like to quote the appropriate section of the relevant law on that issue. That may help me enhance my knowledge, including that of other members of the forum.
From India, Delhi
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc