Saswatabanerjee
Partner - Risk Management
Pramodthakar
Taxation And Hr
Jaspreet Singh Janeja
Dgm - Hr, Ir, Admin
Riteshmaity
Labour Law Advocate
Amit Aishwary Choudhary
Managing People At Work.
+3 Others

My date of birth is 31 Jan 1963.
I joined a Manufacturing Co on 01 Sep 2016.
The Co is deducting my Gratutity @ 4.81% of my Basic Salary as per Co Policy and is part of my C.T.C.
Age of superannuation in the Co is 58 Years.
Assuming that even if I desire to continue in the Co till 58 Years, I would retire on 31 Jan 2021.
From 01 Sep 2016 to 31 Jan 2021, I would have only served for 4 Years and 5 Months.
What will happen to my Gratuity Payment in my case, Will I be eligible and given OR I will not be eligible and hence will not be given then in that case what should I do.
Your gratuity increases with the increase of the service period. But to get the gratuity you must complete 5 years in the service (more than 4 years 6 months).
For the gratuity calculation, the years of service are rounded off to the nearest integer. It means if you have completed the 7 years 7 months in the service, the length of service for gratuity calculation would be 8 years. Similarly, if you have completed the 9 years and 5 months, the period for gratuity calculation would be 9 years.
$$$ According to the law for gratuity calculation your salary will include only the following component:
Basic Salary
Dearness Allowance (if any)
It means HRA, bonus, special allowance and reimbursements are not taken for the gratuity calculation. Now you know, why the private sector employers try to keep basic salary low.
At first, how can a company deduct any percentage from the salary in order to pay gratuity. There is no provisions for such deduction unlike PF. The gratuity is to be paid by the employer from his own pocket only. First get this fact cleared.
Now related to the applicability, if you have served for 5 or more years (4 years and 240 days in the last year) you will be entitled to gratuity.
Gratuity is to be paid on Last drawn wages (Basic+DA) by 26 x 15 days x no of years.
It will be better, if you discuss with your own HR to get the clear picture. It will be better if he will not deduct 4.81% from CTC towards Gratuity as it is well understood that you are not completing 5 years of service till your superannuation, so will not be entitled to claim gratuity.
Dear Mr.Sharma
Service of 4yrs and 5months will not entitle to payment of Gratuity as per the provisions of The Payment of Gratuity Act, 1972. The CTC structure generally prevalent in most companies includes Gratuity as a standard component as it is calculated as 4.81% of the Basic Salary.
As I understand from your post, your HR person must have fixed your CTC as per the standard structure without considering your maximum service period upto retirement age. I would suggest that you put it in their knowledge and request for CTC restructuring on these grounds. You can mail to the concerned HR Executive who has finally negotiated CTC with you and mark a copy to HR Head also. Most probably they will be considering the facts positively and adjust the amount under the head in some other component.
Regards
Jaspreet Singh Janeja
CTC has always been a tool to fool employees into thinking that they are getting paid more then they are actually paid. In your case, it seem to be the perfect example.
There is a good chance you will not get that money because you are not eligible for it.
There is little you can do except request HR to change your salary structure since you will not be eligible for gratuity
Discussions on CTC have already been discussed many time in this forum.

First of all CTC is a COST TO COMPANY Which is internal working but informed to the employee. But which is not having any legal authenticity.

The policy of CTC differs employer to employer.

for example, any statutory changes implicated by the government, the few employer adjust the same liability in CTC bracket and do not take additional burden on them. Such confirmation they takes at the time of appointment or yearly increments from the employee, say EPF-ESI contribution % , threshold limits increases, HRA, medical norms etc.

Similarly, some where it is observed, the Salary structure is agreed on the basis of IN HAND. Under the circumstances employer/company bear the additional burden.

The indirect benefit mentioned in CTC are mostly on the present laws. Whenever any changes arrived in Law, the burden of the said liabilities goes on employer as well as employees as per the changes.

Indirect costs mentioned in CTC are due and payable only if fits in Law. in other words, if it is not due, then not payable even though mentioned in CTC.

HENCE IT IS VERY IMPORTANT UNDER SUCH CASES - THE UNDERSTANDING BETWEEN EMPLOYER AND EMPLOYEE.

Pramod Thakar
The fact should have occurred to you at time of acceptance of the term. Now you can write to HR & top management to refund the amounts deducted as anyway you will not be entitled to gratuity payment.
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