Madhu.T.K
Industrial Relations And Labour Laws
Rsrikanth
Human Resources
Sridharms
Head Hr
+4 Others

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Hi Friends,
I have a question can u help me.
I have joined a MNC on CTC. They mentioned gratuity as part of my CTC and also deduct it on monthly basis and shown it also on my salary slip.
1. Gratuity is a part of CTC or not?
2. How can I get my gratuity amount if I leave the organization before 4 years?
3. Is there any law for this which can provide me the facility to do the case on the company according to my Appointment Letter and Salary Slips?
Please help me.
Regards,
V.K.

Dear V.K,
This has been a normal trend with companies these days. They include gratuity as a part of CTC.
As you must be knowing, CTC is cost to company...which means how much are you costing to company. So gratuity and even Company contribution of PF will be deducted from your CTC.Always remember, while negotiating for salary try to focus more on your take home salary/Gross Salary and less on CTC.
You will not be paid gratuity if you leave before 4.5 years. :-)
Rgds/Rakhee

Gratuity is the amount the employer pays gratuously for the services rendered by the employee. It was then made mandatory obligation of the employers and the length of service defined as 5 years. It should be taken as 'something in addition to whatever paid as salary' when the employee leaves the employer. But now a days it is taken as a material for attracting candidates. By showing the gratuity amount as part of remuneration the amount will go up, but when the employee opens the pay packet he will come to know that so many amounts have been deducted. This is one of such deductions.

If an employer deducts an amount from the salary of the employee it should be presumed that the same would go to a fund refundable with interest in future. As such if gratuity is deducted from the salary every month, it should be construed as refundable with interest irrespective of length of service. It shall be interpreted as an amount paid by the employee to the employer (for the time being). Moreover, any deduction made by the employer other than those permitted u/s 7 of the Payment of Wages Act, 1936 shall be unauthorised deduction. That should be refunded.

Gratuity is payable after 5 years of service and the amount payable is depends upon the salary of the employee at the time of his leaving. Is it possible for the employer to know whether a particular employee will remain with him for 5 continuous years or how long a particular employee will remain with him? Is it possible for employer to predict one's salary at the time of his leaving the job when the time comes not before 5 years?. No, Not at all.

There is no logic in treating gratuity as part of remuneration and if treated as part of salary and deducted on a monthly basis the employer shoould return it when the employee leaves irrespective and without reference to length of service.

Please go through the following likns also:

https://www.citehr.com/129726-amendment-bonus-act.html

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Regards,

Madhu.T.K

HI Rakhee
Have a supplementary question. What is the exact period when an employee leaves the organization that can be construed as being equivalent of 5 years.
What i mean is ---can 4 years 6 months be construed as 5 years or what is this exact period from where gratuity actually becomes eligible.
Also if you have the link to the 1972 Gratuity Act or any Amendment where this period is mentioned will be helpful. The 1972 Act does not clearly mention this.
regards
Sridhar

Dear Sridhar,

An employee is entitled for payment of gratuity only when he/ she puts in a continuous service of five years.
However, "where an employee (not being an employee employed in a seasonal establishment) is not in continuous service for any period of one year or six months, he shall be deemed to be in continuous service under the employer -
  • If the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than -
    • two hundred and forty days.
  • If the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than -
    • one hundred and twenty days.
Therefore, it is necessary for entitlement of Gratuity for the employee to put in-
  • four years of continuous service and in the fifth year not less than 240 days if the whole year is reckoned or 120 days if it is beyond 4years 6 months.
Hope I have answered your question.
CiteHR members may please correct me if I am away from the statute.
Regards,
Srikanth Ramaraju

Dear Sridhar
for gratuity 5 years means 4 complete years and in fifth year the employee must have worked for 240 days . these 240 days would be considered as one year. however after 5 years , six months would be considered as one year. Means 5 years 6 months would be considered as 6 years for calculation of gratuity.
Cheers
Sudhir

Pl guide for salary calculation for months in a dec,09,
Suppose in Dec days are 31 and I am having leave for 04 days so haw many days am eligible to get the monthly salary for DEC and how much gratiuty amount deducted my salary.
regs.
PIYAN KUMAR SINGH

Piyan,
Gratuity amount is not a deduction from salary. It is an amount payable by the employer when the employee leaves after completing the eligible service of 5 years. Besides, it is a payment exclussively by the employer. Therefore, the question of deduction from the salary doesnot arise at allRegards,
Madhu.T.K

Dear Madhu sir
Please tell me how the gratuity psyment is made. What is the document should keep to prove that company paid gratuity amount as this amount is not mentioned on salary register
Regards
Dinesh kumar

Payment voucher is the proof. You can also make an endorsement in form L which is an order issued to the payee to come and collect the gratuity on a specified date. Normally, it follows an application in form I from the employee. However, form I is not mandatory since it is the responsibility of the employer to pay gratuity even if the employee has not asked for it. Please find the attachments.
Madhu.T.K


Attached Files
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File Type: doc Gratuity Form I.doc (29.0 KB, 540 views)
File Type: doc Gratuity L.doc (28.0 KB, 305 views)


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