Dear Seniors,
I have a query. Is the gratuity amount, which is paid after completion of 5 years to an employee, deducted from the CTC of the employee to make provision for payment of gratuity? In my case, my employer has deducted a certain amount towards gratuity from my CTC for the past 4 years and four months. Is this right or wrong? If it is wrong, how would I be able to claim it?
Kindly reply.
Nayana
From India, Mumbai
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3I have a query. Is the gratuity amount, which is paid after completion of 5 years to an employee, deducted from the CTC of the employee to make provision for payment of gratuity? In my case, my employer has deducted a certain amount towards gratuity from my CTC for the past 4 years and four months. Is this right or wrong? If it is wrong, how would I be able to claim it?
Kindly reply.
Nayana
From India, Mumbai
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Hi Nayana,
Please understand that Gratuity is not deducted from your CTC. The term CTC is no longer related to the employee. I hope you are aware that CTC stands for "Cost to the Company." Hence, the ownership of the term "CTC" lies with the employer.
Employers use the term "CTC" to determine the total cost involved in engaging an employee in a specific designation or role. To understand the total cost, they calculate all the expenses incurred for that particular designation.
Therefore, your employer includes the cost of Gratuity in the CTC to show the total cost involved. If you complete 5 years of service, then the Gratuity amount will be provided to you.
Regards,
SDK
From India, Madurai
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Please understand that Gratuity is not deducted from your CTC. The term CTC is no longer related to the employee. I hope you are aware that CTC stands for "Cost to the Company." Hence, the ownership of the term "CTC" lies with the employer.
Employers use the term "CTC" to determine the total cost involved in engaging an employee in a specific designation or role. To understand the total cost, they calculate all the expenses incurred for that particular designation.
Therefore, your employer includes the cost of Gratuity in the CTC to show the total cost involved. If you complete 5 years of service, then the Gratuity amount will be provided to you.
Regards,
SDK
From India, Madurai
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Dear Nayana ji,
CTC, or Cost to the Company, represents the total cost to the company of your employment. The cost towards your gratuity has been incurred by the company since your joining. The company needs to make a provision for your gratuity from the first year of your service. Therefore, the company considers this cost from the beginning. There is no wrong. Mind well, as SDK said, the CTC is not your Salary. CTC is the concept you accept at the time of negotiating your salary.
However, I suggest that employers include a footnote below the CTC structure stating that gratuity is payable to the employee upon completion of 5 years of service as per the POG Act. This will provide clarity to the employee at the time of joining.
Please let me know if you need any further clarification.
Thank you,
[Your Name]
From India, Mumbai
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CTC, or Cost to the Company, represents the total cost to the company of your employment. The cost towards your gratuity has been incurred by the company since your joining. The company needs to make a provision for your gratuity from the first year of your service. Therefore, the company considers this cost from the beginning. There is no wrong. Mind well, as SDK said, the CTC is not your Salary. CTC is the concept you accept at the time of negotiating your salary.
However, I suggest that employers include a footnote below the CTC structure stating that gratuity is payable to the employee upon completion of 5 years of service as per the POG Act. This will provide clarity to the employee at the time of joining.
Please let me know if you need any further clarification.
Thank you,
[Your Name]
From India, Mumbai
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Dear Nayna,
As rightly said by other members, CTC is the "cost incurred by a company towards engaging/retaining an employee." Different companies have different components. CTC may include all monetary and non-monetary expenses and investments that a company makes on an employee.
In your case, it is necessary for you to understand that it is only a notional deduction (if it is shown in the payslip). It could be explained as the amount your company invests on a monthly basis towards your Gratuity, which the company is liable to pay when you become eligible. The only apprehension or concern is what happens if an employee leaves before completing five years of service?
Regards,
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
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As rightly said by other members, CTC is the "cost incurred by a company towards engaging/retaining an employee." Different companies have different components. CTC may include all monetary and non-monetary expenses and investments that a company makes on an employee.
In your case, it is necessary for you to understand that it is only a notional deduction (if it is shown in the payslip). It could be explained as the amount your company invests on a monthly basis towards your Gratuity, which the company is liable to pay when you become eligible. The only apprehension or concern is what happens if an employee leaves before completing five years of service?
Regards,
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
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But we have to all mind it that 5 years of service is not required when the employee got dead or permenent disbalement from the service due to accident or dicease.
From India, Angul
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From India, Angul
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Pl clarify whether any deduction is made from your Monthly Salary towards contribution to Gratuity ? If so what is the amount deducted per month as per your Pay Slip ? K C S Kutty
From India, Madras
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From India, Madras
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Companies do deduct it from CTC, but this is not the right approach or a good company HR approach.
Please refer to the Payment of Wages Act and first see what deductions are called and the legality of deducting any sum from the salary, its maximum percentage, and if under cooperatives then how much. This will give you a basic idea.
Now deductions are accumulated for the fund, which must be a registered fund, but as such GP fund is not a fund where the deductions can be stored; it's not legal.
And you don't have to think of rocket science, just imagine how an employer can ascertain what will be your last pay's basic + DA, on which the gratuity sums would be deducted. The funny thing is, suppose your gratuity is less than 10 lakhs, and you don't have to pay the taxes, that's what statutes say. But see if by adding such a monthly gratuity amount to CTC, you somehow fall under taxable income, then you will have to pay tax each year until you resign and finally get the gratuity. The employer will seek tax relief by showing different heads of such unlawful deductions. That's exploitation of employees.
From India, Calcutta
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Please refer to the Payment of Wages Act and first see what deductions are called and the legality of deducting any sum from the salary, its maximum percentage, and if under cooperatives then how much. This will give you a basic idea.
Now deductions are accumulated for the fund, which must be a registered fund, but as such GP fund is not a fund where the deductions can be stored; it's not legal.
And you don't have to think of rocket science, just imagine how an employer can ascertain what will be your last pay's basic + DA, on which the gratuity sums would be deducted. The funny thing is, suppose your gratuity is less than 10 lakhs, and you don't have to pay the taxes, that's what statutes say. But see if by adding such a monthly gratuity amount to CTC, you somehow fall under taxable income, then you will have to pay tax each year until you resign and finally get the gratuity. The employer will seek tax relief by showing different heads of such unlawful deductions. That's exploitation of employees.
From India, Calcutta
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With reference to Gratuity, I have a caution: Ensure that the collected amount is deposited by obtaining a receipt or confirmation number. In case this is not done, both during the period of service and in the event of the candidate's death, the family could be deprived of the FP family pension.
From India, Nellore
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From India, Nellore
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What is the relationship between GRATUITY and FP family Pension ?
From India, Madras
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From India, Madras
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What is the relationship between Gratuity and FP family pension? In the above post, it is mentioned as follows:
"With reference to Gratuity, I have a caution. Ensure that the collected amount is deposited by obtaining a receipt number. In case this is not done, during the period of service and in the event of the candidate's death, the family would be deprived of the FP family pension."
From India, Madras
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"With reference to Gratuity, I have a caution. Ensure that the collected amount is deposited by obtaining a receipt number. In case this is not done, during the period of service and in the event of the candidate's death, the family would be deprived of the FP family pension."
From India, Madras
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REQUEST FOR DEDUCTION OF GRATUITY AMOUNT (2).pdf
Security Amount Proof.docx