Dear Friends,
My brother is working in a private company since the last 5 yrs and from Oct his salary has been increased. His company pays gratuity to the employees.
I would like to ask the following questions.
1) Till date his gratuity was not included in his CTC. From Oct with the increase in salary, the gratuity is being shown in his CTC and some amount is being deducted from his salary. Is this OK ???
As far as I am aware, gratuity, unlike PF & ESIC, is solely to be contributed by the employer and not the employee. Do I stand corrected???
Somewhere, I have read that contibution towards gratuity differs from company to company. If so, can a company which was not till date deducting the gratuity from the CTC start deducting it now.
What is the actual procedure for contribution towards gratuity. I know the formula of calculating gratuity, I just want to clarify the procedure for contribution towards gratuity --- both on the part of the employer & the employee (If that is the case).
Awaiting your prompt replies.
Regards
From India, Bharuch
16My brother is working in a private company since the last 5 yrs and from Oct his salary has been increased. His company pays gratuity to the employees.
I would like to ask the following questions.
1) Till date his gratuity was not included in his CTC. From Oct with the increase in salary, the gratuity is being shown in his CTC and some amount is being deducted from his salary. Is this OK ???
As far as I am aware, gratuity, unlike PF & ESIC, is solely to be contributed by the employer and not the employee. Do I stand corrected???
Somewhere, I have read that contibution towards gratuity differs from company to company. If so, can a company which was not till date deducting the gratuity from the CTC start deducting it now.
What is the actual procedure for contribution towards gratuity. I know the formula of calculating gratuity, I just want to clarify the procedure for contribution towards gratuity --- both on the part of the employer & the employee (If that is the case).
Awaiting your prompt replies.
Regards
From India, Bharuch
Dear Titili
as far as PF, ESIC and Gratuity is concerned the followings facts to be noted.
For PF : Employer contribution will be 12% of his BAsic and D.A. Though most company's under the name of CTC show that the employer is contributing but at the same time gets decucted from the employee ctc only. The practice is wrong to show it in ctc.
2) ESIC : employer contb is 4.75% of total salary (not exceeding 10,000/-) the same cannot be shown as a part of ctc.
3) Gratuity: when an employee completes 5yrs of service the company is liable to pay him gratuity at time of his exit. Contribuition for the same cannot be collected from employee salary. IT has to be an amount which the company has to pay.
sanjeev
From India, Delhi
as far as PF, ESIC and Gratuity is concerned the followings facts to be noted.
For PF : Employer contribution will be 12% of his BAsic and D.A. Though most company's under the name of CTC show that the employer is contributing but at the same time gets decucted from the employee ctc only. The practice is wrong to show it in ctc.
2) ESIC : employer contb is 4.75% of total salary (not exceeding 10,000/-) the same cannot be shown as a part of ctc.
3) Gratuity: when an employee completes 5yrs of service the company is liable to pay him gratuity at time of his exit. Contribuition for the same cannot be collected from employee salary. IT has to be an amount which the company has to pay.
sanjeev
From India, Delhi
There are companies who even show the gratuity in the pay slip of right the first month of the employee's joining. Your brother's establishment has at least shown it only after he has become eligible for gratuity!
Gratuity is a payment to be made by the employer alone when an employee leaves the organisation after serving for at least 5 years. The amount of gratuity depends on the salary of the employee at the time of his exit. If the employee leaves after 20 years, his gratuity will be bases on his then salary after 20 years. How can we predict how much would be his salary after 20 years? It is not possible. Therefore, there is no logic in showing gratuity as part of salary or Cost to Company, as it is referred to.
Regards,
Madhu.T.K
From India, Kannur
Gratuity is a payment to be made by the employer alone when an employee leaves the organisation after serving for at least 5 years. The amount of gratuity depends on the salary of the employee at the time of his exit. If the employee leaves after 20 years, his gratuity will be bases on his then salary after 20 years. How can we predict how much would be his salary after 20 years? It is not possible. Therefore, there is no logic in showing gratuity as part of salary or Cost to Company, as it is referred to.
Regards,
Madhu.T.K
From India, Kannur
hi titli
there is no contribution that the employer has to make for gratuity. It is just that if an employee leaves the orgnisation after completing 5 years he is eligible for gratuity. the amount is calculated on the last drawn salry of 15 days multiplied by comleted number of years of service.
In your brother's case as now he has become eligible for it, and if he leaves, the gratuity paid by the company is cost spent on ur brother, that is why it is showing in his ctc.
From India, Mumbai
there is no contribution that the employer has to make for gratuity. It is just that if an employee leaves the orgnisation after completing 5 years he is eligible for gratuity. the amount is calculated on the last drawn salry of 15 days multiplied by comleted number of years of service.
In your brother's case as now he has become eligible for it, and if he leaves, the gratuity paid by the company is cost spent on ur brother, that is why it is showing in his ctc.
From India, Mumbai
Hi Titli,
Gratuity is payable after u complete 5 yrs of service with an organization.
I am laying down some details regarding gratuity, hope they wud help in clearing some of your doubts:
Please make a note that the gratuity amount must not exceed Rs. 3,50,000. For govt employees, any amt of gratuity received is totally exempt from tax.
However, for the non - govt employees, please make a note of the following points:
1) For non govt employees ( covered under the Payment of Gratuity Act, 1972), exemption of tax would be on the basis of the following:
a) 15 days' salary last drawn for each completed year of service (15 days salary x length of service)........salaryamt x 15/26
If the period is of service is 6 months or less than 6 months, then pls ignore it. If its more than 6 months, then consider it as 1 yr.
b) Rs. 350000
c) Gratuity actually received
2) For non-govt employees (not covered under the payment of Gratuity Act, 1972); exemption of tax is on the basis of the following:
a) Rs. 350000
b) half month;s avg salary for each completed yr of service
c) Gratuity actually received.
**** However, there are some organisations who take a liberal view when it comes to Gratuity Receiving Eligibility: U wud be eligible for Gratuity if you complete 4 yrs 8 months in an org, which operates for 6 days in a wk; u wud be eligible for gratuity in an org after working for 4 yrs 6 months, provided the org operates for 5 days in a wk.
Thanx and regards,
Ayona
From India, Delhi
Gratuity is payable after u complete 5 yrs of service with an organization.
I am laying down some details regarding gratuity, hope they wud help in clearing some of your doubts:
Please make a note that the gratuity amount must not exceed Rs. 3,50,000. For govt employees, any amt of gratuity received is totally exempt from tax.
However, for the non - govt employees, please make a note of the following points:
1) For non govt employees ( covered under the Payment of Gratuity Act, 1972), exemption of tax would be on the basis of the following:
a) 15 days' salary last drawn for each completed year of service (15 days salary x length of service)........salaryamt x 15/26
If the period is of service is 6 months or less than 6 months, then pls ignore it. If its more than 6 months, then consider it as 1 yr.
b) Rs. 350000
c) Gratuity actually received
2) For non-govt employees (not covered under the payment of Gratuity Act, 1972); exemption of tax is on the basis of the following:
a) Rs. 350000
b) half month;s avg salary for each completed yr of service
c) Gratuity actually received.
**** However, there are some organisations who take a liberal view when it comes to Gratuity Receiving Eligibility: U wud be eligible for Gratuity if you complete 4 yrs 8 months in an org, which operates for 6 days in a wk; u wud be eligible for gratuity in an org after working for 4 yrs 6 months, provided the org operates for 5 days in a wk.
Thanx and regards,
Ayona
From India, Delhi
I have a few queries regarding gratuity.
As far as I know, as soon as the gratuity becomes payable, the employer must determine the amt and send a notice to the person who is eligible for the gratuity within 15 days from the receipt of a claim from the employee.
Is this right? .........my question is: within what time (is there is time constraint?) should the emplpyer send the notice to the eligible employee?
as far as I know, payment of gratuity should be made within 30 days from the date it becomes payable............can anubody plas send me a salary break up attachment showing the gratuity calculations?
thanx and regards,
Ayona
From India, Delhi
As far as I know, as soon as the gratuity becomes payable, the employer must determine the amt and send a notice to the person who is eligible for the gratuity within 15 days from the receipt of a claim from the employee.
Is this right? .........my question is: within what time (is there is time constraint?) should the emplpyer send the notice to the eligible employee?
as far as I know, payment of gratuity should be made within 30 days from the date it becomes payable............can anubody plas send me a salary break up attachment showing the gratuity calculations?
thanx and regards,
Ayona
From India, Delhi
Under any Act Gratuity is not a part of salary and ESI Act also defines Wages as emolument excluding gratuity. Hence no contribution is payable on gratuity paid. But at the same time gratuity being a sum payable by the employer to the employee at the time of exit of the employee that exemption is applicable only to such gratuity which is payable at the time of discharge of employee only. In other cases, it shall be treated as part of remuneration and since it is paid monthly and not in an interval of more than two months, there is every chance that it will be deemed as omitted wages.
Please ignore if I am wrong, why do you pay gratuity monthly when gratuity is payable only when an employee leaves the establishment after rendering a service of at least five years? How do you calculate such monthly gratuity?, Is it based on any projected salary which would accrue after five years or ten years or 20 years because we can not project how long an employee will stay with us and how much would be the salary when he leaves!
Madhu.T.K
From India, Kannur
Please ignore if I am wrong, why do you pay gratuity monthly when gratuity is payable only when an employee leaves the establishment after rendering a service of at least five years? How do you calculate such monthly gratuity?, Is it based on any projected salary which would accrue after five years or ten years or 20 years because we can not project how long an employee will stay with us and how much would be the salary when he leaves!
Madhu.T.K
From India, Kannur
hello everyone
i'm new to this hr field, i have a query abt gratuity. what is the rule for acumulation of gratuity for a pvt firm? can contribution to be recovered from the employees salary just like ESI & PF? or is it purely contribution from the employer ?pls guide me
Thanks & Regards
M. Srinivasa
From India, Bangalore
i'm new to this hr field, i have a query abt gratuity. what is the rule for acumulation of gratuity for a pvt firm? can contribution to be recovered from the employees salary just like ESI & PF? or is it purely contribution from the employer ?pls guide me
Thanks & Regards
M. Srinivasa
From India, Bangalore
It is already clarified that gratuity is not to be deducted from salary like EPF. It is a payment to be made exclusively by the employer when an employee leaves the organisation after rendering a minimum service of five years. There is no question of accumulation of gratuity out of salary paid to employees but in order to provide for gratuity the employer is expected to provide an amount equal to the estimated amount of gratuity payable every year by subscribing to policies of LIC of India.
Regards,
Madhu.T.K
From India, Kannur
Regards,
Madhu.T.K
From India, Kannur
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