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I am continuously, coming across with the statements/ discussions that why the Gratuity is made a part of CTC by maximum companies.
I know its a strategy to increase the CTC size.
i need a proper guidance that showing Gratuity in CTC is an offence or should we cross questioning employer, the reason to do so.

From United States, Southfield
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Hi If Gratuity is part of Gross salary then it is wrong. Any value shown out of Gross is ok and employer just want to project overall cost incurred by the company to employee.
From India, Madras

There is nothing wrong in depicting gratuity in CTC. Indeed not only gratuity, organisations include indirect compensation items like percapita expenses on canteen subsidy, township, medical facility, membership of the social club, etc.
CTC is a non-statutory term and every organisation is free to include the items it is spending its money.

From India, Mumbai

Including gratuity as part of the Cost to Company (CTC) is a common practice in India and is not considered an offense. There are several reasons why employers include gratuity in the CTC:

Compliance with Gratuity Act: The Payment of Gratuity Act, 1972, is a statutory requirement in India that mandates employers to provide gratuity to employees who have completed five or more years of continuous service. By including gratuity in the CTC, employers ensure compliance with this legal obligation.

Transparency: Including gratuity in the CTC provides transparency to employees about the total compensation they are eligible to receive, including both fixed and variable components.

Attracting and Retaining Talent: A higher CTC, which includes gratuity, can be more appealing to potential employees and serve as a retention tool to encourage employees to stay with the organization for the long term.

Budgeting and Financial Planning: Including gratuity in the CTC helps employers budget for future gratuity payments and ensures they have sufficient funds to meet these obligations.

Accounting and Taxation: Including gratuity in the CTC streamlines the accounting and taxation process for employers, as they can plan for and account for gratuity expenses as part of the overall CTC.

It is important to note that including gratuity in the CTC does not mean that the gratuity amount is paid to the employee immediately or along with regular monthly salary. Gratuity is a retirement benefit, and the payment is made when an employee completes five years of continuous service with the organization or upon retirement, resignation, or death.

However, it is crucial for employers to clearly communicate to employees the components of their CTC, including the gratuity component. Employers should also ensure that they comply with the rules and regulations regarding the payment and calculation of gratuity as per the Payment of Gratuity Act, 1972.

If an employer fails to pay gratuity as per the provisions of the Act, it can attract legal consequences, and the employee can approach the appropriate authority or labor court to claim their gratuity dues.


Inclusion of Gratuity in CTC is not an offence by employer. Rather, it is a Recruitment & Selection strategy by the employer. Apart from monthly salary, an employer need to spend money on employee's amenities, perks & allowances, social security, etc.-which is also a cost to company (CTC) .

Thus, employer may record all the heads for which company need to pay, and generate a CTC sheet, which shall be attached to final Offer of Appointment, made to an employee.

From India, Aizawl

It is not an offence so long as it is shown outside the gross salary and no amount is DEDUCTED from the gross salary by way of gratuity. But showing it in the CTC, which itself is not a statutory term, is just to inflate the remuneration. Not only that it is not realistic figure. Everyone shows gratuity per year but the actual cost by way of gratuity should take the length of service also. Therefore, it is just an imaginary figure. It is good if you avoid it, I will not say you should not put it.
From India, Kannur
There can be any benefit provided by employer is a part of CTC . So there is no offence according to me.
But Same time benefit must be deliver ,In case of gratuity its applicable after completion of Five year continue service in an organization. But a lot of Employer do a mistake .After keeping it in CTC its mandatory to book it in account , and they have to pay it when employee resign or leave organization while he/she hasn't completed his 5 years of duty because booked amount is liability and they have to close it.

From India, undefined

It is a common practice that Gratuity is being included as a part of CTC of an employee when they get hired. Gratuity is one of the social legislations in the country which was passed in the year 1972. Gratuity is a benefit to be passed on to the employee at the time of separation on meeting certain conditions as stipulated in the Act.

As per Sec.4A of the Payment of Gratuity Act, 1972, every employer shall, subject to the provisions of the sub section (2), obtain an insurance in the manner prescribed for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India or any other prescribed insurer and whoever contravenes the provisions shall be liable for punishment.

Further, the employer shall calculate the actuarial value of the liability every year with the increase in their salary year on year and make additional premium to the Insurance Company thereby it incurs a cost for each and every employee even though the employee will be eligible for payment of gratuity only on completion of five continuous years of service in the organization (in case of death, condition of completion of five years continuous service is not required).

Hence, it is appropriate for any employer to include the value of gratuity in the CTC since it is a clear cost to the company. Further, it also helps the employer to compute the manpower cost for budgeting, product price fixation, compensation and benefit administration etc.

Ranganathan R S

From India, Madras

Thank you all of you. I agreed that it is neither offensive but it is an strategy to increase the size of CTC.
but Gratuity becomes liable after 5 years and, if this is the law then WHY showing Gratuity in offer letter OR in CTC starting from 1st day. which is meaningless and unethical.

Any person who has to work for 5 years OR 4.8 months to gain Gratuity.

It should be shown after 5 years of service. Because it becomes liability on the employer to pay so after 5 years of service only.

From United States, Southfield


Not exactly. Employers just want to project the total cost incurred for the employee including Gratuity premium.

Nowadays most of the Employers pay premium to insurance company under Group Gratuity scheme.

Employer has to pay the premium compulsorily irrespective of the fact whether employee is going to complete 5 years or not. If the employee completes 5 yrs insurance company will release the Gratuity payment. Alternatively if the employee leaves the company in 2-3 yrs whatever premium paid by employer will go to insurance company only neither company can't claim back or the employee. So as it involves cost factor Gratuity is projected in the CTC.

From India, Madras
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