Dear Sirs,
My Organisation is a Pvt Ltd company.
As a part of my CTC the company is deducting Gratuity each month from my salary.
My query is that if I leave the organisation before 5 years of service am I entitled to claim the gratuity?
From India, Jaipur
My Organisation is a Pvt Ltd company.
As a part of my CTC the company is deducting Gratuity each month from my salary.
My query is that if I leave the organisation before 5 years of service am I entitled to claim the gratuity?
From India, Jaipur
Dear Mam,
I would like to bring to your notice that it is employer or company who makes gratuity as part of CTC. At time of joining company you should have said to them during the interview only. So that this could have been avoided.
Secondly as per gratuity act, it is payable only completion of 5 years and not before completion. Also it is payable in case of accidental death of employee whether you complete 5 years or not. The gratuity amount shall be paid to relative like parent or wife in case married employee.
Hope I addressed your question rightly.
Sunil Choughule
From India, Mumbai
12I would like to bring to your notice that it is employer or company who makes gratuity as part of CTC. At time of joining company you should have said to them during the interview only. So that this could have been avoided.
Secondly as per gratuity act, it is payable only completion of 5 years and not before completion. Also it is payable in case of accidental death of employee whether you complete 5 years or not. The gratuity amount shall be paid to relative like parent or wife in case married employee.
Hope I addressed your question rightly.
Sunil Choughule
From India, Mumbai
Hi,
The gratuity component might have been apportioned towards the gratuity payout which many companies are doing while structuring the CTC and to lure the employees. It may not be deducted from the pay slip. Check again.
Pon
From India, Lucknow
The gratuity component might have been apportioned towards the gratuity payout which many companies are doing while structuring the CTC and to lure the employees. It may not be deducted from the pay slip. Check again.
Pon
From India, Lucknow
Namaskaram
The gratuity will be settled by the Employer after completing five years of service by any person. No company will deduct gratuity amount from the employee. But this amount will be shown in the CTC by the companies. You will not be eligible for gratuity if you leave before five years of service.
Manokavi
From India, Coimbatore
The gratuity will be settled by the Employer after completing five years of service by any person. No company will deduct gratuity amount from the employee. But this amount will be shown in the CTC by the companies. You will not be eligible for gratuity if you leave before five years of service.
Manokavi
From India, Coimbatore
As If employee completes 5 years service then he/she is eligible for gratuity Payment. Secondly few Companies shows as Gratuity in CTC (Cost to Company) components because they might be having Gratuity enrolled Policies with LIC where in certain amount of premium Company need to invest against each employee depending on their (Basic+DA)components as Gratuity payment is directly linked with Basic+DA amount. So to be on safer side few companies have their policy where in they will be able to settle gratuity payments for left employees in time. and no direct burden would be there in companies current costing
Regards
Prashant Hole
From India, Pune
Regards
Prashant Hole
From India, Pune
Job Placement & HR Training Services – Punchkula & Ludhiana
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From India, Taramani
Dream Destination the Complete HR-Solution Providers also brings first time in northern India the Latest Concepts of HR, its Policies & Processes with HR-Manual and Complete Labour Laws like ESI, EPF, Factory Act, Bonus and Gratuity Act & other Labour Laws as along with Export Audit compliance's for Export Industries from Selection to Separation.Sunday Classes (100% Placement till date)
Dream Destination Placement & Consultancy Services®
SCO-3, IInd Floor, Sector-11, Punchkula near Chandigarh
Street No.10, Shivaji Nagar, Shingar Road, Ludhiana-Pb
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Call me at: 9023277081 for any clarification and information
From India, Taramani
First of all there can not be any deduction from payment of monthly salary towards Gratuity because act does not allow so. Therefore please check & correct the query. Secondly, in CTC concept all the cost to employer are part of the CTC. It is also important that if the employee is conditionally employed for less than 5 years, no gratuity amount will be made part of CTC. Further in CTC various amount are shown but they are paid as per the provisions of the respective act only. As such, if any employee leaves before completion of 5 years service, he/she is not entitled for payment of gratuity.
From India, Gwalior
From India, Gwalior
As per the current scenario in private sector companies it has been seen that few companies are making Gratuity as a part of Cost to Company (CTC)/ total emolument payable to an employee per month/annum. Making gratuity part of CTC arose two question-
i) Whether Gratuity should be the part of CTC or not?
ii) In case yes whether can employee claim at the time of separation before completion of 5 years ?
Let us search the answer and evaluate both question in light of provision of applicable relevant legislation i.e of Payment of Gratuity Act 1972 and Rules made therein.
i) Whether Gratuity should be the part of CTC or not?
The preamble of Payment of the Gratuity Act itself is clear that it was enacted to introduce a scheme for payment of gratuity for certain industrial and commercial establishments as a measure of social security. The significance of this legislation lies in the acceptance of the principle of gratuity as a compulsory retrial benefit.
Section 4 of the Act provide the condition for payment
nt of gratuity to any employee as below-
(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years—
(a) On his superannuation, or
(b) On his retirement or resignation, or
(c) On his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
Section 4(2) provides quantum of gratuity payable to the eligible employee as follows-
2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Explanation. —In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.
A plain reading of the above provisions suggest that Gratuity shall be payable to an employee when the employee complete continuous service of 5 years, except in case of death or disablement this condition of 5 year continuous service is not applicable.
“Gratuity” as observed by the Supreme Court in its etymological sense, means a gift, especially for services rendered or return for favors received (Delhi Cloth & General Mills Co. Ltd. v. Its Workmen AIR 1970 SC 919).
The general principle underlying the gratuity scheme is that by their length of service, workmen entitled to claim a certain amount as a retrial benefit (Indian Hume Pipe Co. Ltd. v. ts Workmen See AIR 1960 SC 251). Gratuity has to be considered to be an amount paid unconnected with any consideration and not resting upon it and has to be considered something given freely or without recompense. It does not have foundation on any legal liability, but upon a bounty steaming from appreciation and graciousness. Long service carries with it expectation of an appreciation from the employer and a gracious financial assistance to tide over post retrial difficulties.
Gratuity is social/retrial statutory benefit payable to an employee by employer as reward for good, efficient and faithful service rendered for a considerable period at least 5 years it has been observed by the Apex Court in catena of judgments in on subject and calculation of gratuity amount shall be based on last drawn wages of the employee.
Legally the right which will accrues to an employee after 5 years, how that right can be effected from the day one and further when the calculation is based on last drawn wages how can the amount be fixed initially while the basic wage structure of any employee is subject to change every year.
In view of above we are of the considered opinion that making gratuity as part of CTC is completely against the provisions of PG Act & the intension of the legislation being social welfare legislation.
Further if an employer gives contention that they had made the provisioning for considering the future prospects and had subscribed to scheme of Insurance for setting up a trust for Gratuity fund in terms of section 4A of the Act is also not tenable because section 4A has not been implemented and never notified by Govt of India or any state except state of Andhra Pradesh.
Even in case of constitution of voluntary scheme of Insurance, the employer cannot deduct contribution of gratuity toward such insurance scheme from the wages of employee as there is no provision under PG Act which allow employer to deduct or contribute any amount from the salary of employees. The administration of Gratuity Scheme if any shall be responsibility of the Employer itself.
ii Gratuity is part of CTC, than can an employee claim such amount as wages ?
Thought legally answer to the First question is in negative, but still in grab of CTC , if any employer making Gratuity as part of CTC ( as there is no definition of CTC provided under any law ) and showing the same in monthly & annual pay package than it may amount to earned wages of an employee. In case of any dispute the employee can claim such deduction as illegal and can recover the same as his earned wages.
In case employee did not claim such amount deducted as gratuity from the wages of an employee than it should be deposited to Welfare Commissioner of concerned state in light of the provisions of Labour Welfare Fund Act of that state as an unpaid wages/accumulation at the end of year.
i) Whether Gratuity should be the part of CTC or not?
ii) In case yes whether can employee claim at the time of separation before completion of 5 years ?
Let us search the answer and evaluate both question in light of provision of applicable relevant legislation i.e of Payment of Gratuity Act 1972 and Rules made therein.
i) Whether Gratuity should be the part of CTC or not?
The preamble of Payment of the Gratuity Act itself is clear that it was enacted to introduce a scheme for payment of gratuity for certain industrial and commercial establishments as a measure of social security. The significance of this legislation lies in the acceptance of the principle of gratuity as a compulsory retrial benefit.
Section 4 of the Act provide the condition for payment
nt of gratuity to any employee as below-
(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years—
(a) On his superannuation, or
(b) On his retirement or resignation, or
(c) On his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:
Section 4(2) provides quantum of gratuity payable to the eligible employee as follows-
2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Explanation. —In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.
A plain reading of the above provisions suggest that Gratuity shall be payable to an employee when the employee complete continuous service of 5 years, except in case of death or disablement this condition of 5 year continuous service is not applicable.
“Gratuity” as observed by the Supreme Court in its etymological sense, means a gift, especially for services rendered or return for favors received (Delhi Cloth & General Mills Co. Ltd. v. Its Workmen AIR 1970 SC 919).
The general principle underlying the gratuity scheme is that by their length of service, workmen entitled to claim a certain amount as a retrial benefit (Indian Hume Pipe Co. Ltd. v. ts Workmen See AIR 1960 SC 251). Gratuity has to be considered to be an amount paid unconnected with any consideration and not resting upon it and has to be considered something given freely or without recompense. It does not have foundation on any legal liability, but upon a bounty steaming from appreciation and graciousness. Long service carries with it expectation of an appreciation from the employer and a gracious financial assistance to tide over post retrial difficulties.
Gratuity is social/retrial statutory benefit payable to an employee by employer as reward for good, efficient and faithful service rendered for a considerable period at least 5 years it has been observed by the Apex Court in catena of judgments in on subject and calculation of gratuity amount shall be based on last drawn wages of the employee.
Legally the right which will accrues to an employee after 5 years, how that right can be effected from the day one and further when the calculation is based on last drawn wages how can the amount be fixed initially while the basic wage structure of any employee is subject to change every year.
In view of above we are of the considered opinion that making gratuity as part of CTC is completely against the provisions of PG Act & the intension of the legislation being social welfare legislation.
Further if an employer gives contention that they had made the provisioning for considering the future prospects and had subscribed to scheme of Insurance for setting up a trust for Gratuity fund in terms of section 4A of the Act is also not tenable because section 4A has not been implemented and never notified by Govt of India or any state except state of Andhra Pradesh.
Even in case of constitution of voluntary scheme of Insurance, the employer cannot deduct contribution of gratuity toward such insurance scheme from the wages of employee as there is no provision under PG Act which allow employer to deduct or contribute any amount from the salary of employees. The administration of Gratuity Scheme if any shall be responsibility of the Employer itself.
ii Gratuity is part of CTC, than can an employee claim such amount as wages ?
Thought legally answer to the First question is in negative, but still in grab of CTC , if any employer making Gratuity as part of CTC ( as there is no definition of CTC provided under any law ) and showing the same in monthly & annual pay package than it may amount to earned wages of an employee. In case of any dispute the employee can claim such deduction as illegal and can recover the same as his earned wages.
In case employee did not claim such amount deducted as gratuity from the wages of an employee than it should be deposited to Welfare Commissioner of concerned state in light of the provisions of Labour Welfare Fund Act of that state as an unpaid wages/accumulation at the end of year.
Recently a member shared a circular
PF is not applicable on CTC.
Read here: https://www.citehr.com/488005-pf-not...cable-ctc.html
The same logic applies for gratuity for those who are in CTC regime. The gratuity component is merely shown in the CTC as retiral benefits in order to inflate the CTC and make it more attractive at the hands of employees but such a CTC sheets contain a rider clause of its applicability as per Gratuity Act. This is a trick being played a section of PVT organisations.
Pon
From India, Lucknow
PF is not applicable on CTC.
Read here: https://www.citehr.com/488005-pf-not...cable-ctc.html
The same logic applies for gratuity for those who are in CTC regime. The gratuity component is merely shown in the CTC as retiral benefits in order to inflate the CTC and make it more attractive at the hands of employees but such a CTC sheets contain a rider clause of its applicability as per Gratuity Act. This is a trick being played a section of PVT organisations.
Pon
From India, Lucknow
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