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Dear All,
Greetings of the day..
I am working with an IT company of 30-40 employees. We are enrolled in pf/esi act. I just want to know that is it compulsory to pay gratuity? If yes, then is it deducted from the ctc of employee every mnth? Please help me out in this.

From India, New Delhi
Dear Seema,
The Gratuity Act is applicable if employer engaged 20 or more workmen in any month and it has to be paid to the employee after completion of continuous service of at least 4 years and 240 days.
Of course you can make a provision while deducting partial contribution from his/her CTC.

From India, Mumbai
Dear friend,

Gratuity is a terminal benefit payable by the employer to an employee on the termination of his employment other than dismissal on a/c of certain proven misconduct for which a prior notice of forfeiture has been issued by the employer. The Payment of Gratuity Act,1972 is a complete code in itself on the subject-matter of gratuity payable to the employees employed in every factory, mine, oil-field, plantation and port irrespective of their number and in every shop or establishment within the meaning of any Law applicable to it and has 10 or more no. of employees and in such other establishment having 10 or more no. of employees as.notified by the Central Govt in this regard. The minimum qualifying period of service to make an employee eligible for gratuity is not less than 5 years of continuous service.However, this condition of minimum qualifying service is not applicable to the cases of termination due to death or disablement. Invariably, establishments engaged in IT and ITES are covered under States' Shops and Establishments Acts. You've also mentioned that your establishment already stands covered under the EPF Act.So, the P.G Act,1972 is applicable to your establishment and you have to pay gratuity to your employees on their termination of employment.

Contrary to periodic contribution to P.F and E.S.I, the payment of gratuity is not based on mutual contribution. It is the sole contribution of the employer without making any deduction from the earnings of the employee and of course, it can be included in the C.T.C on actuarial basis.

From India, Salem
Umakanthan M has replied you aptly, you are also requested to refer the Gratuity Act to have a clear cut idea all about Gratuity, enclosing herewith FAQ of Payment of Gratuity for your reference which am sure will help you understand it thoroughly
From India, Ahmadabad

Attached Files
File Type: pdf 23 facts one should know about Gratuity Act in India.pdf (169.8 KB, 867 views)

First of all thanks to all of u for your suggestions.
I have one more querry, that if we are providing a mediclaim insurance to employees, Can it be considered as liability of gratuity? Means then also we are bound to pay gratuity?

From India, New Delhi
Dear Seniors, Would like to know. Are we still liable to pay Gratuity, if the employee absconds, just few days after the completion of 5 years and he was in a legal suspect. Regards Gayathri
From India, Bangalore
Medical Insurance to employees is different from Gratuity, Medical Insurance is provided to cover all medical expenses of the employees whereas Payment of Gratuity is paid for continuous service of an employee, both are different in nature.
From India, Ahmadabad
Yes legally you are liable/bound to pay Gratuity as per the Act
From India, Ahmadabad
No, you cannot deduct gratuity from employee's part and mostly recommended not to be added in CTC. It is solely employer contribution towards an employee who has given his valuable 5 years for the oragnisation.
So every employer has to pay gratuity to employee who has completed 5 years.

Hi Seema,
The payment of Gratuity Act, provides for payment of gratuity on completion of 5 years of continuous service. However in the event of unfortunate death of an employee the minimum requirement of 5 years is not required.
The concept of CTC is just to indicate that what is the total cost involved in employing an employee by the employer. Not all the components mentioned in the CTC are deemed as payable to the employee. Similarly the payment of Company contribution of PF and Contribution to the Gratuity Fund with LIC or any other agency can not be construed as recovery from the employee's CTC.

From India, Madras

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