Gratuity Valuation in CTC

Hello Friends,We have a Group Gratuity Scheme of LIC with life Cover. Wherein we pay premium every year to remew the same.Gratuity amt calculated = Last Drawn Basic x 15/26 x Completed Year Service Now i am in the process of restructuring the Salary from Public Sector Line to MNC style i.e. CTC formsGiven the background my questions are1. Whether Gratuity forms a part of CTC? 2. Is it legal to include Gratuity in CTC? What is the ususal practice3. How do the benefit per employee to be calculated you know if to be shown in CTC.4. How the Gratuity is valued if you want to know the CTC whether it forms a part of the same or not.5. Please also let me know how Mediclaim is to be valued as benefit to employee - whether it forms a part of CTC or not. Please let me know at earliest. You can mail me on hank youRegardsPari

Hi Pari,

In my opinion, Medi-Claim can be included in CTC, if the medi-claim premium payment is being done by the company on behalf of the employee.
In my organisation, we include in CTC. We have slabs for each grade, say if an employee is in Grade C, then the slab says that his premium amount should be 1000/-, then the same amount of Rs. 1000 as medi-claim is considered in CTC computation.

W.r.t to Gratuity I have no idea.

Regards,

Sumana

Dear

Both Gratuity and Mediclaim can be part of CTC.
In my company, Gratuity is calculated@ 1.92% of Gross CTC and Medical Allowance @ 3.33% of CTC.


Cheers
Parul

Hi,

I think Gratuity and Medilciam can be included in CTC. This is totally depond on the organisation practices and policies. On the other hand if we not include the gratuity and mediclain in CTC, then we can show the same as additional benefits (only meediclaim)

Regards
chams

Yes 1.Gratuity is a part of CTC----2. Yes its totaly legal.----3.put one part for Monthly basis and second for annualy. I AM MAILING YOU AT CORP.LEVEL.

Dear All,

What we do in our company is, we include Gratuity in CTC calculation.

Reason:

That is payment which company is suppose to pay the employee, so it should be calculated in "COST TO COMPANY"

Gratuity can be part of CTC. ie (Basic+DA/26*15) can be shown as part of CTC. The premium component of Mediclaim can also be part of CTC.

Ravi Warrier

Thanks SumanaYou mean first co has to decide on amount gradewise which they think employee is entitled.Then they have to approach insurance companies for quotes.And insurance companies will inform the insurance cover accordingly.Then how can we syncronise the HR Policy - say Co. promises mediclaim cover of Rs.1.00 lacs to employees. How will fit in with the premium. Thats one thing.Secondly if i decide and take mediclaim of Rs.1.00 lacs per employee + 3 in family coming upto 4.00 lacs per employee. In case of senior members it can go upto 12.00 lacs (3.00 per employee + 3 i.e. 3.00 x 4) How do I represent that in CTC monthly as wel as annual.You all have cleared my notion about including Mediclaim premium and Gratuity in CTC but not how it is valued / calculated / costed.Please clear me on this.Thank youRegardsPari.

Hi Parul,About Gratuity it is to be valued at 4.83%. a detail explanation posted on site i m attaching for your reference. And please tell me the reasoning / logic of 3.33%. Also clear 3.33% of what.Please,You can mail me on hanksRegardsPari

Attached Files

	Gratuity calculation.doc (24.5 KB, 2396 views)
	Gratuity Valuation knowledge.pdf (60.2 KB, 1315 views)

Following are my replies to your queries:

1. Whether Gratuity forms a part of CTC?
Yes. As per the CTC concept, we should calculate the total cost incurred by the company on employing a person. So, each & every cost incurred on benefits, retirels, direct & indirect etc needs to be included in CTC calculation. It varies from company to company depending upon company philosophy & policies & the person who is calculating the cost.
2. Is it legal to include Gratuity in CTC? What is the usual practice
Yes very much. Almost all companies include gratuity in CTC.
3. How do the benefit per employee to be calculated you know if to be shown in CTC.
Different companies have different practices. Following three are most common:

i) By using actual gratuity formula i.e. 4.83% of PF salary (Basic + DA + any other component on which PF is being deducted).
ii) Actuarial calculation, i.e. some where about 6 % of PF salary. Logic in support of this formula comes from the fact that payment is being made to employee not on the day of calculating CTC but on the day of exiting on current PF salary.
iii) Many companies have gratuity link insurance policies. They simply put the yearly insurance premium into CTC calculation for respective employee.
4. How the Gratuity is valued if you want to know the CTC whether it forms a part of the same or not.

Pl refer the reply given to point no.3

5. Please also let me know how Mediclaim is to be valued as benefit to employee - whether it forms a part of CTC or not.

Yes it is. Yearly insurance premium given for the employee needs to be taken into CTC calculation.

Regards,