Gerry has explained the concept of gratuity in a clear way...ctc means cost to the company...and gratuity payment for an employee is a cost to the employer, nothing wrong if the same is included in per the gratuity act, definitely it gets payable after completing 5 years of service, employee himself is responsible for not getting the gratuity payment if service is less than the mentioned period.


Hi hr_ROY The proportion of Gratuity is 4.81% of basic+DA salary whch add in CTC. supoose if BASIC+DA=20000p.m GRATUITY PROPORTION IN CTC =11520pa(BASIC+DA*4.81%)*12 plz correct me if i m wrong.
From India, Delhi
Rahul Chhabra

Dear Gerry, Nice explanation, however Gratuity has never been a Retention Tool and will never be. Its an instrument to ensure social security after retirement!! Regards, Rahul Chhabra
From India, Delhi

  • Gratuity is a cost incurred on employee. Hence it is perfectly ethical to include Gratuity in CTC sheet.
  • There are many more costs which are included in CTC and actual benefits to employee against those costs are subject to many conditions and eventualities. For Example employer is incurring cost of employer contribution to ESI but employee will get benefited only in case he falls sick and chooses to avail benefit from ESIC. Same is a case with Group Insurance Premiums.
  • In case of Gratuity even though it is payable after 5 years service, employer has to incur gratuity cost from day one by way of Group Gratuity Premium or Provision for future gratuity payments.
  • However, not all employees are aware of terms and conditions applicable to payment of gratuity. Hence employer has to be very transparent and upfront in not hiding such finer points while offering CTC.
  • CTC Sheet should always give bifurcation of all the costs included, separately mentioning which are the components payable monthly, annually and other benefits.
  • There should be specific footnote mentioning that, Gratuity is payable only after completion of five years service, at the time of seperation only.

From India, Pune
I am fully agreed about showing gratuity in CTC by the companies and not paying to their employees, as unethical, if they leave before completing five years.
On should understand that gratuity is not a cost to the company but the organization is paying to its employee as gratitude to its employees, who has given a good time and their valuables to the organization.

From India, New Delhi

I was told by my employer while joining that the gratuity amount would be deposited with govt authorities if I leave them before completing 5 yrs as Gratuity is included in the CTC. I will not get back the gratuity which is kept aside as gratuity if I chose to leave them before 5 yrs. This practice is unjust and unethical.

From India, Lucknow
It depends on the company to show it under the CTC or not.
However if the company wants to show gratuity as part of CTC then the same should be communicated to employee at the time of issuing the offer/ appointment letter. Then the employee decides to join the company with such terms and conditions or not.
Michael Joseph

From India, Bangalore
Hello All,
My employer gave me appointment letter of Ist company on 01.08.2005 after six month i.e on 01.02.2006 they transferred me in IInd company without giving any appointment letter . And after three month i.e. 01.04.2006 they transferred me in IIIrd company without giving any appoint ment letter till date I am working in IIIrd Company . In first company they paid me in cash and in IInd and IIIrd compnay they paid my salary in cheques . And all the three company are being run by family management .
Now till date i have rendered my service for more than 5 years . Whether this 5 years of service will be eligible for Gratuity purpose . Please guide me.

From India, Delhi
Vasant Nair

Yes, under the circumstances stated by you, you are entitled to payment of Gratuity. Vasant Nair
From India, Mumbai
Rahul Chhabra

Dear Parduman, You are eligible for Gratuity as the principle employer is the same!! Regards, Rahul Chhabra
From India, Delhi

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