Dear Seniors, Can anybody tell me how we get 4.81% of basic salary as the rate of deduction of gratuity ???? I want the mathematical calculation ....
From India, New Delhi
Manager (hr & Admin.)
Human Resource
Dgm - Hr And Admin
+3 Others

I just want to know how we get this formula - 4.81% of Basic for calculating the amount for gratuity deduction.....
From India, New Delhi

The basis of 4.81% is
Let us take an employee's basic pay is Rs.100/-
Gratuity eligibility per year is latest basic / 26 * 15
Then the calculation is = 100 /26 * 15 = 57.69231
Then for one month = 57.69231 / 12 = 4.81 per month
Balaraman - TVS-Chennai

From India, Madras
K. Gopalakrishnan

Dear HR Fraternity / Others,
In my viewpoint, the calculation of Gratuity in CTC of an employee is an eye-wash. I don’t know which HR fellow has introduced this in his company, where ?, when ?, why ?. All these years and many of the companies where these HR fellows are following this bad precedent.
If an employee only after completing his 5th year of continuance service in a company and get relieved on resignation or superannuation will be getting this amount as Gratuity. I am a HR fellow who hates this practice. I never introduced in my company where I worked so far. For the same HR fellows the same rule applicable – if he completes the full term of 5 years only, he is going to get this benefit.
There is no use for an employee who quit the company before completion of 5 years of service. Also another benefit called Superannuation scheme – its highly unreasonable one to be included in the CTC.
K. Gopalakrishnan
ASPI - Sriperumbudur

From India, Bangalore
K. Gopalakrishnan

Dear HR Fraternity / others,
One more thing - whether the Company includes this Gratutiy in your CTC or not - you have to be provided with the Gratuity automatically once an employee completes his 5 years of continuous service amicably and quits the company.
It is not a monthly / annual coolie........... it is a benefit which a company offers to its employee - for good conduct and work for continous five years which he rendered for the company.
So inlcuding 4.81% in monthly CTC and annual CTC is ..................... something fishy.
if anyone get his offer letter - please do not hesitate to ask the Top HR fellow - what will be your take home pay (THP), thats more important............... even some fellows will include the Group Medical Insurance Policy amount which a company pays annually to the insurance company - in your CTC. Plesae be careful........ juniors............
K. Gopalakrishnan

From India, Bangalore

Dear Gopalakrishnan,
It has to be included in CTC. CTC represents cost to the company and gratuity coverage starts from the date of joining. Company has to contribute annuity amount every year for all employees whether he is 5 years more or less. As per Gratuity act if anything happens to employee's life immediately after drawing one month salary, the surviving family members will get full gratuity amount.
Bala, Chennai.

From India, Madras

Dear Sir,
I want to know that few days back i have attended my interview following qestion was raised so please clear my ....qestion.
1. If company employee has injured for out side, what will comany will dermenate as soon....
2. If employee is not covered in ESI, what will company will give full salay...
So you are request to please do the needful.

From India, Delhi
Vasant Nair

Dear Friends,
First and foremost, there cannot be any deduction of any %age against Gratuity from an employee's salary. It is illegal and most unfair.
I am of the opinion that including Gratuity in the CTC of an employee is not fair. After all an employee becomes eligible for Gratuity ONLY after completion of 5 years' continuous employment with the Company. If the employee decides to leave the Co. or is asked to leave before 5 years' he/she will be deprived of this benefit.
CTC fixation calls for salary negotiations and most times the employee's current remuneration package becomes the basis for deciding the new CTC.
At times some smart candidates also include leave encashment in their current CTC with the intention of getting a better package. How do we address such a situation??
Best Wishes,
Vasant Nair

From India, Mumbai

Calculation of gratuity % is not as simple as is illustrated in these discussions. If the employers are showing gratuity at 4.81% and including in the CTC, they are in a way misguiding the candidate. This % is valid any if the person leaves the company after 5 years. If a person leaves before this period, he is not entitled to. To arrive at gratuity % is a separate science itself. This is similar to how life insurance premiums are fixed. The factors which influence the gratuity contribution by the company towards its employees are:

Salary of all the employees

Date of birth of each employee

Retirement age of employees

No of years the employee has put in in the company.

These data are asked every year by the organization which manages the company's gratuity fund (in most cases it is the LIC). On furnishing these data the organization calcuates how much fund the company should deposit in this account. In my experience of over 30 years, the % has not crossed 0.5% of total basic and DA. Please understand there is also a cap on the gratuity payable to a person when he quits the company and hence such a low %.

Hope I am clear

With best wishes


From India, Bangalore

Dear Mr Gopalakrishnan :
In our Group of companies which I am heading the HR functions, though we have the Gratuity in the CTC, in case of employees leaving the services of the company prior to 5 yrs services, the amount being considered for gratuity in the CTC is being paid back to the employees in his final settlement.
Also, perhaps, you may think of having the Gratutiy policy with the Insurance companies, which I am sure u may be aware of.

From India, Hyderabad
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