Umakanthan53
Labour Law & Hr Consultant
TIKARAM CHAUDHARY
Gratuity & Leave Encashment Trust Fund
+1 Other

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If a company hires an employee on contract for a period of 3 years and shows gratuity as one of the CTC component and later when the contract is closed / terminated does the employee gets the gratuity? If not then where does the amount kept aside as gratuity has gone ? Does the employee has the right to claim that as it was indicated in his CTC before joining
The issue of CTC has already been discussed in this forum several times and the questioner may go through them to understand the concept of CTC and its impact on the actual earnings of the employees.
CTC or Cost To the Company is the total annual expenses incurred by the company per employee. In other words, it is the gross salary actually payable plus the value of benefits. The benefits normally comprises of statutory contributions payable by the employer in respect of the employee to EPF,ESI,Gratuity Fund etc., and non-statutory contributions like Personal and Family Health Insurance premia or the value of medical reimbursements as the case be, statutory bonus,surrender leave salary, canteen subsidies and the like. In fact, it is only a trick or allurement to attract employees for the reason that apart from the actual salary and other periodical statutory payments, the employee would get each and every benefit shown in the CTC only when the occasion for it arises subject to his eligibility for that benefit.
Making annual provision for Gratuity on actuarial basis is, if I remember correct, is the obligation of the employer as per Accounting Standards[ AS 16]. Hence mention in the CTC. The employee can claim gratuity only on his fulfillment of the eligibility conditions. Just because it is mentioned in the CTC, he can not claim it when his contract of employment gets terminated on completion of three years.One should remember that CTC is a mere statement of projected cost per employee and not part of the contract of employment.

I am satisfied with your reply. Thanks a lot Sir
In my understanding, Employer may be allowed to show Gratuity as a part of CTC in the appointment letter or on salary slip of employee, if company is giving right for entitlement of Gratuity to his employees without any vesting Condition. It means that if employee leave the organization even on completion of 1 month of past service, Employee would be eligible for Gratuity Equivalent to (15/26)×last drawn wages×(1/12)
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