Dear sir, I workedin a pvt company where gratuity was deducted from me. I worked for 2 yrs and 2 months, they deducted gratiuty and did not pay stating i have not completed 5 yrs. are they right to deduct gratuity from me secondly pf was not deducted stating "pf exempt". pls clarify
From India, New Delhi

Gratuity is a monetary benefit given by the employer to his employee at the time of retirement or at the time of separation, after completion of specified tenure (as defined in the Payment of Gratuity Act, 1972). It is a defined benefit plan where no contributions are made by the employee. Prior to 1972, there was no law where it was mandatory for the employer to pay employees gratuity at the time of retirement.
In view of above, it is totally incorrect, illegal and unjustified if your employer deducted "gratuity" from your pay packet. Depending upon the quantum of amount deducted from your salary, under the head "gratuity" you can even initiate suitable legal action against the employer

From India, Aizawl

Pl check, employers generally add gratuity as part of the CTC to make it look attractive, but neither it is paid nor shown as deduction. But if Gratuity amount is shown as deducted from salary, then it is illegal and improper as there is no provision for making such a deduction, it is an illegal deduction and actionable against the employer. But if from salary no deduction on gratuity head is shown and the employer has denied gratuity to you, then it is not wrong.
If you were drawing salary in excess of PF limit right from the start of your employment with this company and if you were earlier also not a member of the scheme, then the action is justified. Otherwise it is also illegal.

From India, Mumbai
Dear Ravi,

CTC is a part of implied contract.. Appointment letter is drawn or CTC sheet is signed.

Condition of five years of continuous service, is there in sec 4 read with sec 2A of the Payment of Gratuity Act, 1972. But the same section under its sub section 5 provides that:

"Nothing in this section shall affect the right of an employee to receive

better terms of gratuity under any award or agreement or contract with the


If your employment contract (appointment letter or signed CTC sheet) is available with you...while taking the cost of gratuity into account, if, you and your employer have agreed and included the gratuity component in the CTC without any conditions specified, you are entitled for the gratuity, as that appointment letter / CTC sheet becomes an instrument providing better terms and therefore, it would be treated as part of law. If your employer denies it, please give him a notice in Form I, wait for one month for his reply and then file claim in form N.

But, if, in your appointment letter / cost sheet, it has been specified that gratuity will be payable on completion of five years continuous service, then, you cannot claim. Even, if mentioned tat gratuity is payable as the Payment of Gratuity Act, you cannot claim it.

With due respect to learned friends who expressed their opinion that mention gratuity in CTC is cut from agreed pay-packet, I strongly disagree with their contentions. Computing, explaining and agreeing "cost" of an employees before joining does not violate any law of the land. On the other hand it removes vagueness of the terms of employment contract...but it is advisable to both employers and employees to have the clarity before signing a contract.

P K Jadia,

Labour Law Consultant, Silvassa, DNH and DD,


From India, Jalalpur
Hi ,
Employers used to add gratuity to make your CTC More attractive,it is not deducted from your salary.It is part of your CTC,will be given to you if you completed minimum of 5 years of services with Company.

From India, New Delhi
Dear HR Manager,
Your views are not exactly as law stand today. Please read the sub sec 5 of Sec 4 of PGA.
Your CTC is your valid understanding (implied contract). If it does not specify, the eligibility for gratuity payment as per PGA, or on a minimum qualifying continuous service of of five years, by default, it payable without any qualifying service.

From India, Jalalpur

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