24th August 2018 From India, Ahmedabad
Just because some employer includes the term Gratuity in the CTC does not change anything as far as the applicability of the Payment of Gratuity Act. It will and shall remain the same with 5 years being the criteria in an employment continuously, subject however to the technical qualification of the last year if anyone resigns/retires/superannuates in the fifth year, in which case 240 working days comes into play.
Thanks and Regards
24th August 2018 From India, Hyderabad
27th August 2018 From India, Mumbai
No part of expenditure on account of gratuity is payable by employee.
Having a gratuity fund with LIC is the company's look out for timely payment of gratuity as and when employees exit and are authorised gratuity.
27th August 2018 From India, Pune
28th August 2018 From India, Salem
Read this >>> <a href="https://www.sabkuchonline.in/2018/02/know-all-about-gratuity-hindi-gratuity.html">What is Gratuity Eligibility and other rules?</a>
29th August 2018 From India, Delhi
Please note that, the payment of gratuity is additional expenditure to employer as a part of social security benefit t employee.
However, employer has to keep provision towards payment of gratuity for having completing continuous service rendered by an employee.
But if an employee dies while working, the completion of five years will not come to picture and the payment has to be made to the nominee as per prevision.
To make more attractive package to employees, we people(HR) will create / add this amount in CTC is bad practice.
Someone has suggested to cover this risk under LIC is best option.
31st August 2018 From India, Bengaluru
Once the employee completes 5 years or 4 years and 240 days whichever is earlier in case an employee resigns, gratuity will be paid on last drawn basic @4.81% along with full and final settlement.
If gratuity is a part of CTC and an employee leave with 4 years, company is not liable to pay Gratuity.
31st August 2018 From India, Delhi
#AnonymousNothing wrong in making gratuity as part of CTC to my knowledge and need not blame HR. What is CTC, it states what is the total expenditure for an organisation on an organisation which includes all benefits statutory and non statutory that are payable to him. A benefit like LTA will be paid on termination or resignation as part of settlement, while benefits like gratuity are subject to statutory provisions. It is basically to understand by both sides what is an employees cost to organisation.
1st September 2018 From India, Hyderabad
If any component in salary is part of CTC then it should be payable to employees at time ending FY or exit of employees
there is no clause to retain this amount even statutory condition is not full fill but mostly company is agree to pay.
8th September 2018 From India
If Gratuity is included in CTC or excluded. doesn't matter.
If employee balance earned leave shall be considered to complete five years of service.
Employer can hold Gratuity payment in certain case.
Employee is dismissed through services due to misconduct as per law
8th September 2018 From India, Satara
Inclusion in CTC does not mean that you will get gratuity without completing minimum period as stipulated by law.
Calculation : Basic Salary*15/26 * more then 4 Yrs 240 Working Days... He/ she will be applicable for the Gratuity...
9th September 2018 From India, Bangalore
I suggest that the employers should refrain from writing CTC and should clearly specify in the appointment letter to his employee, the amount of salary/wages he would be paid + the statutory benefits like PF, ESI, Bonus, Gratuity etc. Even if the employer does not mention CTC, the employee understands it and gets it in accordance with the applicable law.
Give it a thought.
Best wishes and regards
13th September 2018 From India, Chandigarh
Indeed, writing the word CTC is unnecessarily giving a handle to the Controlling Authority, Appellate Authority of Higher Courts to construe its meaning against the employer. It really does not bring any benefit to him. May be he may have to face hard time to give justifications at different forums for such an unnecessary word. Hence, better avoid than feel sorry later.
14th September 2018 From India, Chandigarh
No employee would like to leave his/her liberties assured the time of hire and entitled avail complete facilities were offered.
Dear Seniors, correct me if I am wrong.
15th September 2018 From India, Bangalore
The representation from employer side is ,if you can stay for a long period here then there would be an additional advantage of gratuity,finally gratuity cost bear by the employer only and hence it is an expenses towards employee by employer.If monthly salary does not includes the gratuity cost then there is no liability to pay gratuity before maturity period.
27th September 2018 From India, Delhi
Pl.be clear - Gratuity is
1. A Service benefit due & payable only on completion of 5yrs of contiuous service with the very same employer;
2. It's not payable monthly as a part of salary whether one follow CTC or non-CTC pattern;
3. If an employee leaves the employment before completion of 5 yrs continuous service, he/she has to forfeit the gratuity as it is not encashable like 'unutilised leave at credit';
Of course, in some cases like PSUs, govt/quasi govt. services, grauity could be transferred by remittance/transfer of proceeds from the previous employer to the present employer when mutually agreed to such an arrangement;
4. An employer can either follow the Gratuity Act or their own Gratuity Rules modeled on the Gratuity Act (which offers more benefits than the Act). In such cases the gratuity kitty is known to be much more than what's offered under the Act;
5.Gratuity Act does not offer any clarification of CTC type of service condition.
(I also feel (Govt of India), the Gratuity Act should be amended to address concerns
reg.CTC type of conditions of service.
29th September 2018 From India, Bangalore
7th October 2018 From India, Mumbai
But this explanation of yours does not answer the query. It seems that the term 'CTC' is relevant only for the employer for his budgeting purposes. In no way it inspires any extra motivation in employee's mind because he will get these statutory benefits whether employer write CTC or not in his appointment letter. Rather, another window of trouble may be opened for the employer in case the employee leaves service before completing the eligibility period of gratuity and choose to claim gratuity as being part of CTC. The 'Controlling Authority' may agree to his claim as this is a more beneficial right made available to him in his Appointment Letter and the same is also in tune with section 4(5) of the Payment of Gratuity Act, 1972.
Best wishes and regards
7th October 2018 From India, Chandigarh
7th October 2018 From India, Mumbai
It's high time everyone should be clear some of the facts already discussed here by learned members. To summarise them -
1. Indian laws doesn't offer any, any interpretations about CTC.
2. Practicing, imposing or accepting & interpreting CTC is the prerogative of employers & employees & at one's own cost & risk.
3. Even courts have not spelt out any codifications on CTC.
4. Though, generally gratuity is considered as part of CTC there is no hard and fast rule whether to include or excluded and what are all.
5. Even Gratuity Act also doesn't say anything about CTC.
6. Irrespective of whether or not included in CTC, gratuity is payable when an employee leaves an employer subject to ONLY after completion of a qualifying "continuous service" of 5 years ( 4 yrs + 240 days in the 5th year) with the very same employer (except when he/she forfeit gratuity as per law on certain lawful grounds).
7. Even when included as part of CTC, gratuity is NOT payable monthly as it is not part of gross salary or take home salary.
8. There is no legal obligation for an employer to open a bank a/c and invest gratuity fund on monthly basis. However it's the legal responsibility of an employer to create adequate provisions/liability towards gratuity in their Annual Accounts which is compulsory as this is meant to defray gratuity obligations of the employer.
9. In case of non-payment of gratuity to a legally eligible employee, the employee can seek intervention of appropriate officers & legal remedies. In which case the employer is liable to pay over due interest on delay in payment of gratuity at prescribed rates. Therefore there cannot be loss even when payment is delayed.
10.Above all gratuity is NOT contributory like EPF from employees' side as employers have to contribute 100% including over due interest.
Individual queries if any, on certain complications can be addressed.
8th October 2018 From India, Bangalore
Alternatively, if the CTC description clearly says Gratuity under Payment of Gratuity Act, then the employee is eligible only under the Payment of Gratuity Act after completing stipulated service.
However, this has no been tested in any court as of now. If CTC description simply says Gratuity, then the employee can only move Civil Court and can not file a pettition under Payment of Gratuity Act.
There are many judgements on wages and salaries but to my knowledge there is no Judgment on the term CTC as it has no place in Labour Law as on date. One needs to move a civil court to get correct verdict on this subject.
However, I always advise my clients to use the terminolgy Gratuity under Payment of Gratuity Act when giving break up of CTC
12th October 2018 From India, Chennai
In CTC concept, generally there is notional debit of certain amount from CTC. Because the amount agreed as remuneration is not being paid but kept aside to be paid towards gratuity. While in other cases, in older pay structure philosophy which is also known as GPA or Gross per Annum, where the gratuity is Benefit and was being paid over and above the agreed remuneration.
Gratuity is loyalty bonus, and if the amount towards loyalty bonus is from employee’s committed CTC, ethically companies are bound to pay irrespective of the eligibility tenure, yeah it may not be termed as Gratuity but can be said as Ex gratia. On ex gratia there will not be any Income Tax relief.
So it depends on the company’s policy, progressive and ethical companies if makes debits/provision towards Gratuity from employees' CTC, they do pay as ex gratia prior to 5 years’ tenure and as Gratuity upon completion of 5 years.
12th October 2018 From India, Mumbai
Could you post/share info of any instances of gratuity when followed under CTC pattern was paid in cash/cheque/cr.to a/c or in any manner by in any co/firm. Obviously employers will have to pay gratuity to those employees when they leave their firm if the employees completed 5 yrs continuous service as per the Gratuity Act and there is no confusion. Whereas what we are deliberating is in case employees leave firms before completing 5 yrs of qualifying service for gratuity and if so how they are paid the component towards gratuity form part in CTC pattern. We have been believing in such instances, these firms do not pay anything as gratuity and thus concerned employees are deprived of their share of CTC. Hypothetically, assume Mr.X, throughout his career, say till his superannuation age of 60, went on changing his employers, in every such change over, before completing 5 yrs and therefore Mr.X never tasted any gratuity in his life time just because i) he didn't complete 5 yrs with any of his employer and ii) all his employers followed only CTC. Does this fit into logic ? What's the solution ?
13th October 2018 From India, Bangalore
Appreciate inputs from various learned members on gratuity. However the following may please be clarified.
1.Where is it mentioned that an employee 4 years and 240 days of service will be entitled for gratuity. This is debatable. Is it through high court decision ( chennai, if i remember it) , if so , is a decision of high court applicable only to the particular state or is it applicable to all over india??
2. In general it is 5 years of continuous service for entitlement, where 5 years and beyond 6 months is 6 years, else it will be for 5 years.
3. If the word 240 days is used, ( does it include weekly Off's, holidays, leaves ) or is it on working days or calendar days?? There is no clarity on this . ?
Can somebody please throw light on the above??
15th October 2018 From India, Visakhapatnam
2. In general it is 5 years of continuous service for entitlement, where 5 years and beyond 6 months is 6 years, else it will be for 5 years. - Correct
3. If the word 240 days is used, ( does it include weekly Off's, holidays, leaves ) or is it on working days or calendar days?? There is no clarity on this . ?- All days including Paid Holiday, Weekly Off, All Authorized leave are covered to calculate 240 days / 5 years service
15th October 2018 From India, Pune
This part of interpretation is being discussed in this forum almost for a decade now. Seekers, please take atleast a few minutes to refresh past postings on the matter being discussed. This will avoid oft-repeated matters raised all over again. Pl.be informed
e judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service. As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity."
The gratuity act says continued services. The continuity in service is clarified by SC a year means 240 working days in a different context but nothing is stopping you to adopt the sum & substance of the concept while applying. Hence , an employee who has completed 4 years 8 months and 18 days continuously without any break is eligible for Gratuity under the Act.
For further reading use this link-
15th October 2018 From India, Bangalore
Thanks for your insight. Has the gratuity act amended to above affect?? Has there been a gazette notification , Appreciate if you any information on this?
I think it is no. Then the interpretation of this for now left to individual employer. Barring few companies, most companies would avoid extra outflow, if the service is below 5 years service.
Also, in some cases the Gratuity is shown under CTC and part of the employee's compensation. But here also certain companies might pay and few others might not pay.
Thanks and warm regards
16th October 2018 From India, Visakhapatnam
Re: Gratuity in respect of employees under CTC - for those who either leave before 5 yrs of qualifying service or otherwise.
It's high time that citeHR forum & members should mobilise public & political support for reigning(rein) in some legislation addressed to 1) for codifying CTC pattern type emoluments and 2) rationalisation of terminal benefits to those switching jobs before completing qualifying service covered under CTC. Now, At a time the frequency of switching of jobs especially in IT/ITES, Bio-Tech sector is witnessed very high and therefore it's timely need.
This has major impact more on gratuity contribution than other benefits like accumulated leave left behind unavailed, health insurance, unutilised LTC pertaining to the past service etc. Some sort of transfer arrangement like EPF should be in place to solve the loss in this regard.
16th October 2018 From India, Bangalore
1. SC verdict covers all States
2. HC Judgements will cover the specific State
3. However, if there are no other Judgement by any other State High Court, the NJudgement may be construed as binding on Lower Courts But if any appeal is pending, then this may not be binding in other States
31st October 2018 From India, Chennai
31st October 2018 From India, Bangalore
TV reports indicates that the GoI is seriously considering amending the Payment of Gratuity Act to enable entitlement to gratuity to those completed 3 yrs itself instead of present 5 yrs continuous service. If this becomes real lakhs of employees will receive the benefit, may be at the cost of employers, who shouldn't mind (keep guessing what's going to be like- prospective or retrospective, keep fingers crossed) . Reports suggest that GoI solicited opinions of stake holders (here not the employees but from employers). May be the election year will boast of this new beginning, a wind fall indeed, let us hope. All the best to all frequenters.
Yesterday From India, Bangalore