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Referring to the comment "Though an employee can receive the gratuity amount only after 5 years, some employers add that in their CTC every year i.e if an employee leaves before 5 years then it will remain only in papers."

Is it legally permitted?

Should the organization not pay the amount if the same has been deducted as part of CTC irrespective of completing the tenure of 5 years

From India, Imphal


This topic is previously discussed.

Any amount deducted towards Gratuity premium within Gross salary should be paid by the employer irrespective of the tenure completed by the Employee. But any component out of Gross salary and which form part of CTC salary there is nothing wrong and employer is under no obligation to pay that amount to employee if the date of exit is before completing 5 years.

From India, Madras

Can you see gratuity amount being DEDUCTED from your salary? Is it somewhere shown in the salary slip?

CTC is not salary but it is the sum of the cost that the employer (Company) shall incur by employing you. That shall contain statutory payments that the employer is bound to pay you as part of giving permission to do the business. Therefore, it has no legal sanctity. Moreover, good companies do not show the gratuity amount without a qualifying sentence like, "payable depending upon conditions as laid down in law in force/ Payment of Gratuity Act.

From India, Kannur
@Vmlakshminarayanan @Madhu.T.K thanks a lot for your valuable inputs appreciated

@Madhu.T.K - The deduction is not mentioned in the salary slip, however the appointment letter with CTC structure mentions about gratuity deduction. The same is deducted accordingly.
The appointment letter also mentions it will be paid " in accordance to Gratuity Payment Act 1972"

From India, Imphal

When the appointment letter says that gratuity will be paid as per Payment of Gratuity Act, it will be paid as per the law only. Every year the employer is liable to mark a certain amount towards gratuity and this is done after an actuarial valuation as per accounting standards. Whereas n death cases the requirement of five years service is not required, the employer is bound to pay it if something happens to the employee. On the other hand, gratuity shall be forfeited even for an employee qualifying to gratuity in certain cases. It all depends on certain conditions.
From India, Kannur

Some companies calculate gratuity as part of the CTC ( i.e. 4.81% of the basic salary per year ), and paid only when the employee leaves the company irrespective of his/her tenure. In that even they very cleary mention in the appointment , salary structure sheet accordingly. If gratuity is not part of the CTC, and an employee is entittled it for after completion of 5 years; one has to mention it cleary in the appointment letter. After 5 years, the Cost of the Employee to the company increases.

The standard formula of gratuity is -(15 * Your last drawn salary * the working tenure) when an employee leaves the company, and paid on his/her settlement.

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