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We have one employee will be joined shortly. He wants to opt out the gratuity as it is part of CTC. is it possible?
Need your suggestion.
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Employee has not understood concept of CTC
Payment of gratuity is a legal compulsion
Why does the employee want to opt out of a benefit to himself
Gratuity is a good practice and also law controlled.
company can make gratuity of part of CTC and can pay monthly basis but one thing is gratuity is not part of salary or monthly wage.
Hi All,
Can we show gratuity in CTC basis. If yes how will you show amount in CTC. Where we can not show in paysheet or deduct in m0nthly wages.
Thanks and Regards,
Kashinath
An employee who does not require gratuity but wants to get it included in the monthly package is one who has decided not to be with the organisation for five years. Don't under estimate such employees. They are very cleaver and will bargain that he does not require any gratuity but would like to get it included in the monthly allowances. he is sure that he is not going to be there in the company for long. And in case he completes the eligible period of five years, he knows that he will get gratuity without considering that he has already taken it on a monthly basis. My advise to HR persons is that you should not revise the salary and do not hire such persons who wants the gratuity to be included in the salary.
in case of Death while in Service, the Employer is liable to pay Gratuity.Consequently, it is advisable not to give an option to opt out, though there is no such provision in the Act
The "gratuity" contemplated under the Payment of Gratuity Act,1972 is strictly a terminal benefit in addition to other terminal benefits whether statutory or otherwise. Based on the concept of CTC that is devoid of any specific statutory recognition in the matter of wage and salary administration, some employers project the gratuity which is a future benefit as a periodical outflow of employees' cost so as to misrepresent it as the current cost of employment with the ulterior motive of getting an edge in the matter of salary negotiation. The employees also fail to understand that payment of gratuity is contingent upon certain conditions and it requires no periodical financial contribution from him. Contracting out is impliedly prohibited u/s 14 of the PG Act,1972.
In most companies Gratuity (4.81%) of CTC is shown as cost to company to calculate gross.
It's notional entry and debit, as it's future provision to pay the gratuity which is mandatory.
However. many companies doesn't pay to employees when he leaves before completing 5 years which is unethical.
"many companies doesn't pay to employees when he leaves before completing 5 years which is unethical."
Sir,
How is it unethical.
Payment of Gratuity Act stipulates minimum 5 years continuous service for eligibility of gratuity to arise.
If you leave before 5 years of service question of gratuity does not arise.
Gratuity paid as statutory under Gross per Annum concept where the amount is over and above your committed pay.
In CTC concept part of employees committed CTC is kept aside from the very first month as a provision to pay him when it becomes applicable.
While negotiating with the employees it is been projected as his earning...which would be true only for employees staying with the company for more than 4.6 years.
Hope this clarifies.
Regards
Shailesh Parikh
9998971065
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