Is it ethical on the part of employer to keep gratuity in the CTC. As far as I know gratuity is only applicable after completing 5 years in the organization and can only be paid then, so is it right to have it accounted in the CTC of the employee from the first year onwards?
From India, Lucknow
Rahul Chhabra
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Dear Husain,
It depends upon the company. If they have an affiliation with any of the insurance company for Gratuity purpose, some companes indicate the same in the CTC. but it should not be shown in the CTC in general.

From India, Mumbai

It is unethical but many companies resort to this practice. The employees who goes out of the company before completing 5 yrs, are the losers. It is one of the tricks of retaining employees. pon
From India, Lucknow
what if the employee leaving before 5 years demands the gratuity amount to paid to him/her in some other head, since it is a part of his/her CTC which was offered during the time of appointment. My qs is will the co. be liable to pay the amount deducted towards gratuity every month if an employee leaves the organization before 5 years, even though not under gratuity but some other head.
From India, Lucknow

Yes it is logical but only thing is that if an employee leaves the job before completion of 5 years he shall get that amount back during his full and final settlement.oterwise it is a unjustice to that employee.
From India

Dear Kamran,

I am sorry to disagree with you as well as with all my other friends who appear to have agreed that it is unethical, etc. etc. to show gratuity as part of CTC.

If a potential candidate is shown only a lump-sum figure as the amount promised to him, I agree with you that it would be unethical not to pay the amount either on a monthly basis or at the time of leaving (even if the employee leaves before the period of 5 years).

However, if a full break-up is shown to the employee, and the rules for payment of gratuity are disclosed, there is nothing unethical about not paying the amount to an employee who quits before the qualifying period of 5 years.

The law clearly stipulates the conditions under which Gratuity is payable to an employee. If the amount is not taken into account while computing the CTC, it would mean a sudden, unintended jump in the CTC of the employee after he/she completes 5 years. Kindly remember that after completing the requisite period of 5 years, gratuity is payable for the past period, from day 1.

Grauity, by its very nature, is meant to reward service, provided it is given for a minimum period of time. This serves as a retention tool, albeit a rather weak one, and there is nothing unethical about it. Today, there are many incentive schemes, (including stock option schemes) that, once earned, are paid out in stages, provided the employee continues to remain in service for defined period of time.

I maintain that as long as all conditions for payment of a certain amount are disclosed to an employee at the initial stage, and the rules are not changed midway, there is nothing unethical in the said practice.


From India, New Delhi
I agree with mr gerry 303 that is the fact of gratutity act.And Employer is required to have provisions and pay to the fund every year cannot keep with him( fund ceated with LIC)
From India, Pune
Vasant Nair

I personally would not include Gratuity while calculating the CTC since this (Gratuity) is payable only after he/she completes 5 years of continuous employment with the Co. This may or may not happen.
But sometimes candidates do tend to include Gratuity in their current CTC to inflate their current CTC in order to bag a better remuneration package. In such cases it would be in order to include Grattuity as part of the CTC which is offerred to the selected candidate.
It is a matter of comparing apple to another apple.
Vasant Nair

From India, Mumbai

Dear friends,
HR is always talk and worry about attrition but while talking about long service, we take a step back. Monthly remuneration is eligible only after continuing completing 26 days of work and one cannot expect full salary working partly in a month. Similarly one will qulaify for gratuity after completion of stipulated period of services as per the act. And after all CTC is cost to the Company and Company have to calculate monthly liability to an employee whether he/sh is going to continue for one year or ten years.
And it is up to the candidate to calculate the net earnings per month at the time of interview and negotiate with the employer if it is not sufficient to his / her services. So it is not the matter of ethics but this is a matter of ones ability to negotiate with the emplyer and demand better salary.
May my opnion is different, but let us debate and have more clarity.
PT Ramesan

From India, Tiruppur
Rahul Chhabra

Dear Kamran,

1. History - Gratuity was supposed to be a gift from the employer in the initial days, but, now no more. Its a rightly earned service benefit and it serves as a social security to an employee; after his retirement, so that he can take care of his family in a respectable manner!!

2. Request you all to study the Payment of Gratuity Act, 1972!! This will solve a lot of queries!!

3. As per section 4 of the act:

"Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, -
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease"

So, a continuous service of 5 years is a must!!

4. Also, the idea behind the formulation of act was to provide a social security to workmen after their retirement!!

In a way, no gratuity should be payable if you are young, socially secure and believe in skipping jobs!! ;) (Just Kiddin!!)

5. Well, next time you negotiate your salary, keep the structure in your mind!! and even if Gratuity is a part of your CTC, then its your money only, which u will get after 5 years of service!!

6. I believe, calling gratuity as Retention Amount is sheer violation of the purpose of Gratuity as mentioned in the act!!

Rahul Chhabra

From India, Delhi

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