As per POG Act, employer is liable to pay Gratuity only after completion of 5 years continuous service.
Now, your query is- if in CTC of an employee his employer considers Gratuity burden / cost also and the employee leaves his service before completing 5 years, in this case is that employee eligible for Gratuity?
There may be different opinions on this.
In my opinion, the employee is not entitled for Gratuity. Gratuity is payable only after completion of 5 years of continuous service.
CTC is not salary. CTC is a concept.
Cost of Gratuity in CTC is towards the provisions of gratuity which the employer is liable to do under the Act. If the employer covers his employees in Gratuity Pollicy of any insurance company then the employer has to pay this amount to the insurance company as premium. The insurance company does not refund the amount of premium paid if any employee leaves the service not completing 5 years.
To avoid any ambiguity, I advise my clients to mention in the foot note of CTC Structure that the Gratuity is payable only after completion of 5 years of continuous service.
I feel you need to abreast yourself in this regards. This forum has discussed on the judgement which you are referring to, n number of times.
I forced myself to respond you so that the viewers / readers are not misguided. The judgement is binding only in the jurisdiction of HC: Madras.
Thanks for your valuable comments but in our company employees are saying that as you are showing Gratuity in the CTC so that should be paid whether we have completed 5 years or not.
But as far as Act is concern it is payable only after completion of 5 Yrs of 4 yrs 240 days.
so anybody having any write up saying that it is not compulsory to pay gratuity if it is shown in CTC, for who have not completed 5 years.
The total of gratuity component of CTC of first 5 years will be payable only on completing them; in fact such employee get more as gratuity would be calculated at the 5th year's rate of basic & DA, if any.
If it is not specifically discussed, the total component for period of less than 4 years, 10 months will not be legally payable as the Act is not applicable for such length of service.
Sure this will clarify doubts of all.