My date of birth is 31 Jan 1963. I joined a Manufacturing Co on 01 Sep 2016. The Co is deducting my Gratuity at 4.81% of my Basic Salary as per Co Policy, and it is part of my C.T.C. The age of superannuation in the Co is 58 years.
Assuming that even if I desire to continue in the Co until 58 years, I would retire on 31 Jan 2021. From 01 Sep 2016 to 31 Jan 2021, I would have only served for 4 years and 5 months.
What will happen to my Gratuity Payment in my case? Will I be eligible and given it, or will I not be eligible and hence not be given it? If not, what should I do?
From India, New Delhi
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Assuming that even if I desire to continue in the Co until 58 years, I would retire on 31 Jan 2021. From 01 Sep 2016 to 31 Jan 2021, I would have only served for 4 years and 5 months.
What will happen to my Gratuity Payment in my case? Will I be eligible and given it, or will I not be eligible and hence not be given it? If not, what should I do?
From India, New Delhi
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Your gratuity increases with the increase of the service period. However, to be eligible for gratuity, you must complete 5 years of service (which is more than 4 years and 6 months).
For the gratuity calculation, the years of service are rounded off to the nearest whole number. This means that if you have completed 7 years and 7 months of service, the length of service considered for gratuity calculation would be 8 years. Similarly, if you have completed 9 years and 5 months, the duration for gratuity calculation would be 9 years.
According to the law, for gratuity calculation, your salary will include only the following components:
- Basic Salary
- Dearness Allowance (if any)
This implies that House Rent Allowance (HRA), bonus, special allowance, and reimbursements are not considered in the gratuity calculation. This explains why private sector employers often aim to keep the basic salary low.
From India, Surat
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152For the gratuity calculation, the years of service are rounded off to the nearest whole number. This means that if you have completed 7 years and 7 months of service, the length of service considered for gratuity calculation would be 8 years. Similarly, if you have completed 9 years and 5 months, the duration for gratuity calculation would be 9 years.
According to the law, for gratuity calculation, your salary will include only the following components:
- Basic Salary
- Dearness Allowance (if any)
This implies that House Rent Allowance (HRA), bonus, special allowance, and reimbursements are not considered in the gratuity calculation. This explains why private sector employers often aim to keep the basic salary low.
From India, Surat
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At first, how can a company deduct any percentage from the salary in order to pay gratuity? There are no provisions for such deductions, unlike PF. The gratuity is to be paid by the employer from his pocket only. First, get this fact cleared.
Now, related to the applicability, if you have served for 5 or more years (4 years and 240 days in the last year), you will be entitled to gratuity. Gratuity is to be paid on the last drawn wages (Basic+DA) by 26 x 15 days x the number of years.
From India, Kolkata
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Now, related to the applicability, if you have served for 5 or more years (4 years and 240 days in the last year), you will be entitled to gratuity. Gratuity is to be paid on the last drawn wages (Basic+DA) by 26 x 15 days x the number of years.
From India, Kolkata
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It will be better if you discuss with your own HR to get a clear picture. It will be better if he does not deduct 4.81% from CTC towards Gratuity as it is well understood that you are not completing 5 years of service till your superannuation, so you will not be entitled to claim gratuity.
From India, Bahadurgarh
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From India, Bahadurgarh
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Dear Mr. Sharma,
Service of 4 years and 5 months will not entitle you to payment of Gratuity as per the provisions of The Payment of Gratuity Act, 1972. The CTC structure generally prevalent in most companies includes Gratuity as a standard component as it is calculated as 4.81% of the Basic Salary.
As I understand from your post, your HR person must have fixed your CTC as per the standard structure without considering your maximum service period up to retirement age. I would suggest that you bring this to their attention and request CTC restructuring on these grounds. You can email the concerned HR Executive who negotiated the CTC with you and also copy the HR Head. Most likely, they will consider the facts positively and adjust the amount under a different component.
Regards,
Jaspreet Singh Janeja
From India, Chandigarh
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Service of 4 years and 5 months will not entitle you to payment of Gratuity as per the provisions of The Payment of Gratuity Act, 1972. The CTC structure generally prevalent in most companies includes Gratuity as a standard component as it is calculated as 4.81% of the Basic Salary.
As I understand from your post, your HR person must have fixed your CTC as per the standard structure without considering your maximum service period up to retirement age. I would suggest that you bring this to their attention and request CTC restructuring on these grounds. You can email the concerned HR Executive who negotiated the CTC with you and also copy the HR Head. Most likely, they will consider the facts positively and adjust the amount under a different component.
Regards,
Jaspreet Singh Janeja
From India, Chandigarh
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CTC has always been a tool to fool employees into thinking that they are getting paid more than they are actually paid. In your case, it seems to be the perfect example. There is a good chance you will not get that money because you are not eligible for it. There is little you can do except request HR to change your salary structure since you will not be eligible for gratuity.
From India, Mumbai
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From India, Mumbai
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Discussions on CTC have already been discussed many times in this forum.
First of all, CTC is a Cost To Company, which is internal working but informed to the employee. However, it does not have any legal authenticity.
The policy of CTC differs from employer to employer. For example, when any statutory changes are implemented by the government, a few employers adjust the same liability in the CTC bracket and do not take additional burden on themselves. Such confirmations are typically obtained at the time of appointment or yearly increments from the employee, including EPF-ESI contribution %, threshold limits increases, HRA, medical norms, etc.
Similarly, in some cases, the salary structure is agreed upon based on the IN HAND amount. In such circumstances, the employer or company bears the additional burden.
The indirect benefits mentioned in CTC are mostly based on current laws. Whenever there are changes in the law, the burden of the said liabilities falls on both the employer and employees as per the changes.
Indirect costs mentioned in CTC are due and payable only if they fit within the law. In other words, if they are not due, then they are not payable even if mentioned in CTC.
HENCE, IT IS VERY IMPORTANT UNDER SUCH CASES - THE UNDERSTANDING BETWEEN EMPLOYER AND EMPLOYEE.
Pramod Thakar
From India, Pune
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First of all, CTC is a Cost To Company, which is internal working but informed to the employee. However, it does not have any legal authenticity.
The policy of CTC differs from employer to employer. For example, when any statutory changes are implemented by the government, a few employers adjust the same liability in the CTC bracket and do not take additional burden on themselves. Such confirmations are typically obtained at the time of appointment or yearly increments from the employee, including EPF-ESI contribution %, threshold limits increases, HRA, medical norms, etc.
Similarly, in some cases, the salary structure is agreed upon based on the IN HAND amount. In such circumstances, the employer or company bears the additional burden.
The indirect benefits mentioned in CTC are mostly based on current laws. Whenever there are changes in the law, the burden of the said liabilities falls on both the employer and employees as per the changes.
Indirect costs mentioned in CTC are due and payable only if they fit within the law. In other words, if they are not due, then they are not payable even if mentioned in CTC.
HENCE, IT IS VERY IMPORTANT UNDER SUCH CASES - THE UNDERSTANDING BETWEEN EMPLOYER AND EMPLOYEE.
Pramod Thakar
From India, Pune
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