csj2410
One of our employees joined at the age of 54 years as Manager and now he is at the age of 58 years whether he is eligible for Gratuity and as per the Gratuity is applicable only on completion of 4 years and 240 days. Further, now the employee is demanding the Gratuity amount which was shown as his part of CTC. How to go about in this case kindly help me out.
From India
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Umakanthan53
Labour Law & Hr Consultant
Drsivaglobalhr
Doctor Siva Global Hr
+1 Other

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umakanthan53
5877

Dear friend,

The age of the employee at the time of entry into the service of the establishment is not a criterion of eligibility for gratuity under the Payment of Gratuity Act,1972. On the contrary, it is the completion of the minimum qualifying length of continuous service of not less than 5 years on the date of termination of his employment other than death or disablement. As per the provisions of sec.2-A (2) of the Act, if on the day of termination of employment, the employee has completed 240 days or 190 days in the 5th year of his service depending on the type of the establishment, he should be deemed to have completed 5 years of continuous service in the establishment.

CTC, being an accounting tool of the employer to assess his annual overall cost of employment per employee, has no statutory force in the matter of settlement of any claim for statutory gratuity.

From India, Salem
drsivaglobalhr
288

Dear Colleague,

Very well guided by our Colleague.

Kindly read in addition:

Age is not a criteria for Gratuity and as per the provisions of the Gratuity Act, an employee who completes 5 years of service ( condition exempted incase of death or disablement). Once he becomes eligible, 15days of wages for every completed year of service to be paid as gratuity which is a payment to demonstrate the " Gratitude" of the employer for the exemplary service rendered for the organization.

Coming to the Second Part on Adding Gratuity as part of CTC:

This is an important factor and I have the liberty to use the word " Mistake" many organizations do while computing, negotiating and documenting the CTC.

Components like:

- Provident Fund Contribution
-Gratuity
- ESI contribution

are mentioned in the CTC to understand the total Cost the employer is incurring on an employee. But these are Statutory and must to comply hence there is no option.

Where the basic mistake arise is that when " negotiating" the offer, many companies add these components also and arrive to show " Total Increase of % in CTC" compared to last employment. Say 25% or 30% increase etc. The Candidate also accepts and comes in. When he leaves with less than 5 years of service he looses the Gratuity Component which was negotiated and agreed. Here comes the confusion in many organizations. Hence it is suggested that keep the cost of Statutory components "out of negotiated increase %" and show in a different bucket and mention that such statutory benefits are applicable only when the employee completes the stipulated conditions under the relevant statue etc. This will bring clarity to both sides.

From India, Chennai
drsivaglobalhr
288

Dear Colleague,

Very well guided by our Colleague.

Kindly read in addition:

Age is not a criteria for Gratuity and as per the provisions of the Gratuity Act, an employee who completes 5 years of service ( condition exempted incase of death or disablement). Once he becomes eligible, 15days of wages for every completed year of service to be paid as gratuity which is a payment to demonstrate the " Gratitude" of the employer for the exemplary service rendered for the organization.

Coming to the Second Part on Adding Gratuity as part of CTC:

This is an important factor and I have the liberty to use the word " Mistake" many organizations do while computing, negotiating and documenting the CTC.

Components like:

- Provident Fund Contribution
-Gratuity
- ESI contribution

are mentioned in the CTC to understand the total Cost the employer is incurring on an employee. But these are Statutory and must to comply hence there is no option.

Where the basic mistake arise is that when " negotiating" the offer, many companies add these components also and arrive to show " Total Increase of % in CTC" compared to last employment. Say 25% or 30% increase etc. The Candidate also accepts and comes in. When he leaves with less than 5 years of service he looses the Gratuity Component which was negotiated and agreed. Here comes the confusion in many organizations. Hence it is suggested that keep the cost of Statutory components "out of negotiated increase %" and show in a different bucket and mention that such statutory benefits are applicable only when the employee completes the stipulated conditions under the relevant statue etc. This will bring clarity to both sides.

Take care,
Dr.P.SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu

Disclaimer :
When any article is referred kindly read for academic purpose only and do not take decision, do not go with any vendor or agency for that matter.

The write up is a general view and the reader is advised to have his own wisdom and knowledge and further refer to competent professionals and then only take call on his / her own.

From India, Chennai

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