Can I Claim Gratuity as Part of My Monthly Salary? Seeking Advice from Experienced Professionals

I had worked in a company for 3 years. In my appointment letter, Gratuity is included in my CTC which reads as under: "Your total monthly remuneration is: Basic Da HRA CA Other Total Employer Contribution to PF Bonus Gratuity Grand Total."

My query is whether I can claim the gratuity amount as it is part of my monthly remuneration. Seniors, please advise.

Dear – If it is a part of monthly remuneration you must have received this amount every month. You are also saying that this is the part of CTC. In that case it is shown as cost to the unit but at the same time this is to be given at the time when you become entitled to receive it in accordance with the provision of the P G Act, 1972. Moreover this point of showing gratuity in CTC has always become the point of discussion for our HR members. In my opinion you are not entitled to receive the payment of gratuity amount from the company. Opinion submitted as requested. Regards, R.N.Khola (Labour Law & Legal Consultants)

Dear,

By including gratuity in the CTC, employers deceive employees because it is payable only after 5 years of service. They display it in the CTC but do not pay it if someone leaves before five years. This is the prevalent culture in IT and software development companies.

Regards,
J. S. Malik

Dear Mr. Malikji,

For calculating gratuity, how do we consider long leave taken (e.g., Maternity leave) to count the completed 5 years?

Dear colleagues,

Maternity leave taken as per the Maternity Benefit Act will be counted as a working day for calculating the number of years of service or any other purpose.

Regards,
J.S. Malik

Hi,

If you are on the payroll of the company, including all long leaves, then you are entitled to gratuity after 5 years of continuous service. Some companies make gratuity payable if an employee completes 4 years too. But as per the act, to be eligible for gratuity, one must complete 5 years of employment with the company.

But if the appointment letter does not clearly mention that the monthly gratuity amount is payable only after completion of 5 years of service, then you can always claim the amount. If it has not been given on a monthly basis, then it should be due to you as a lump sum amount upon your resignation.

Discuss with your HR, seek an answer as to why such an ambiguous payment structure is given if the company has no intention of providing gratuity before completion of 5 years. This is my personal opinion; I think one must make some noise so that the policies change, at least for the benefit of the rest.

Thanks, Geeta

Dear,

As your gratuity was included in your CTC, and CTC is the cost to the company, it is already clear that they have given the amount of gratuity with your salary on a monthly basis as mentioned in the salary breakup. However, it can only be availed after completion of 5 years of your job tenure.

Hi, as per my knowledge, gratuity is payable only after completing 5 years of service at a rate of Gratuity = (Basic + DA) / 26 * Number of Years of Service * 15.

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Hi, Gratuity is eligible only after completing five years of continuous service. However, this will be included in the CTC.

MANOKAVIN

Hi,

Though gratuity is a part of your CTC, according to the Gratuity Act, an employee becomes eligible to receive the gratuity amount only after completing 5 years with the same organization. Therefore, in your case, you are not entitled to receive this amount.

Thanks,
Shikha
Email at shikhasinghal200@gmail.com

You cannot claim for gratuity. Gratuity will be paid after 5 years of completion of continuous service.

Dear, anything paying above the minimum wages of particular states, a company can include anything in your CTC. Currently, a call centre including coffee and drinking water used by the employees are taken into CTC. It is not a violation, but you will get it after completion of five years continuously working at the same company. In case you leave the job before completion of 5 years, then you would not receive gratuity. You can consider this amount as separate from your side. Don't take this amount into consideration. You will get 15 days' wages per year of your current salary (if you have completed 5 years).

Suppose your basic salary is 30,000/month, and you resign after completing 6 years in the same company, then you will get: 30,000/26*15 = 17,307 for 1 year, but you worked for 6 years, so you will get 103,846.

Regarding your maternity: there is no link between maternity and gratuity. If you worked in an organization for a minimum of 80 days, then you are eligible to receive maternity leave for 12 weeks.

Best Regards,
Sajid Ansari - Delhi

Hi,

Please verify your offer letter. Your company may have mentioned it as variable pay. Gratuity is not binding on the company unless you complete 5 years of continued service with the company.

Regards,
Prasanna

Hi all,

I read in the Gratuity Act of 1972 that completion of 5 years (strictly speaking, 4 years and an excess of 6 months) of continuous service is not required in case of the death or disablement of an employee. Could someone please clarify whether an employee who dies or becomes disabled on the very first day of his job would be eligible for gratuity? If so, what calculation method should be followed?

Regards,
Vissu

Everybody is right in this case, but let's see this situation from the employer's side. Gratuity is payable after completion of 5 years of service, but the employer will pay the contribution to the insurance company from the first year. Due to this reason, the employer considers it as a cost of the employee.

Hi, Some organizations compute all expenditures towards the employee as CTC. In case an employee resigns before five years and is not entitled to gratuity, the amount computed as Gratuity in the appointment order needs to be paid back to the employee as it is part of his CTC. It could even be considered as ex gratia.

Hari

Hi,

When we talk about CTC, it is every penny spent by the employer on retaining the employee. We also agree that a handsome amount is spent on gratuity, superannuation, etc., which are not counted by employees unless they become eligible to receive it. In one way, the employer is spending money, and in another way, we are deprived of it because we leave the job before becoming eligible for the payment.

Hence, when we agree to CTC salary, please do not consider every component of CTC payable to you. It is the cost of the benefits you will get when you become eligible.

Regards,

H R Singh

Dear Mr./Miss,

Gratuity is applicable after five years of continuous service. Therefore, you are not entitled to gratuity.

With regards,

Rajesh Chauhan

You will be entitled to receive gratuity only after completing 5 years of continuous service. If it is included in your payslip from the very beginning and the company is showing it as a cost to the company, then it will be understood as if you are receiving gratuity from the first month of your joining the company, which is against the provisions of the Payment of Gratuity Act.

Get it clarified by your HR department.

If gratuity is part of CTC, the employer must pay it monthly along with the salary. If they are not paying it, you have to claim it because it is part of your CTC even if you have not completed 5 years of service. CTC is not governed by the Gratuity Act of 1972 and does not have a ceiling amount of Rs. 350,000 because it is part of your salary. You can claim CTC Gratuity as part of your salary. Please note that gratuity included in CTC is part of the salary which can be claimed at the time of leaving the employment.

Thanks,
Pramod Pandey
9833722600
The Crescent Group

Sec. 4 of the Payment of Gratuity Act, 1972 confers a right on the employee to receive gratuity. Here, the condition applies that they must have rendered continuous service for not less than 5 years. However, you have only completed 3 years of service. Therefore, you are not liable for this gratuity amount yet. I suggest you speak to the HR personnel of your company regarding this whole issue to understand why they have included this gratuity in your Cost to Company (CTC).

Shivani Pathania

Hi,

Gratuity is payable only after completion of five years of continuous service. Before that, we cannot claim it for early leaving. Rule is rule.

Regards,
Dinesh Chandra Sharma

Yes, gratuity is payable as per the law after continuous services (without any break) of 5 years. Adding gratuity in CTC is only an eyewash, and no company, I think, will give gratuity if an employee leaves before 5 years of service, even though it is added in your CTC. Thanks.

Dear, Since your service was less than five years, you are not eligible for Gratuity payment. The concept of showing the Salary of an employee in the form of CTC (Cost To Company) is a gimmick developed by new generation companies particularly IT/ITES to attract employees and making them fool. The CTC will include all costs – fixed and variable, historic and future or actual and anticipated- which are to be incurred due to employment of a person. Under the CTC concept even the expenses which are to be met after 5 years of employment are not spared but the projected sum is distributed evenly through out right from the first month of service. Similar are the cases of Employees Provident Fund contribution and the Gratuity. These are statutory obligations of the employer. Though EPF contribution takes place every month the gratuity payment takes place only once and that also after five years of service. When no one is certain that he will be in continuous service for five years with an employer the practice of showing gratuity in the salary cannot be encouraged. More over, gratuity is not payable to any employee during his service but it is payable only when he leaves due to any reason including death. The practice of including employer's contribution to EPF as part salary and then making a deduction of the amount from the salary shall be interpreted as recovering employer's contribution from the employee and can be challenged as ‘ an employer shall not deduct his own share of contribution from the salary of the employee'. Similarly an employer cannot realize any amount from the employee for payment of gratuity in future. In the conventional style of salary fixation, the Basic Salary is fixed and allowances like Dearness allowance, House rent Allowance etc are declared as percentages of the fixed basic. The other benefits will be offered as ‘stated in the standing orders of the organisation'. or benefit available to the employees of a particular category. Including everything in CTC is not a best practice to be encouraged, rather Gross Salary concept is always better option to elaborate the structure of salary. Thanks Mohd. Arif Khan

Hi members,

If the company includes gratuity in the CTC, it will be paid when we are relieved from the company's services, especially if it organizes a gratuity trust. Even if the employee works for only one month, they will be eligible for the gratuity if it is included in the CTC. I have had the experience of receiving a gratuity check from the company after working for 1.8 years. In fact, this policy depends on the company.

Regards,
S.V

Hi members,

If a company includes gratuity in the CTC, it will be paid when we are relieved from the company's services if it organizes a gratuity trust. Even if the employee works for one month, they will be eligible for gratuity if it is included in the CTC.

I had an experience where I received a gratuity check from the company after working for 1.8 years. In fact, this policy depends on the company.

Regards,
S.V.

Hello, 👋

Yes, I also agree with the other comments. The gratuity is payable after five years of continuous service in an establishment, and it can be a part of CTC.

Pramod Sharma

Organizations will have to account for Gratuity payment; hence, it will be shown under CTC. As per the Gratuity Act, gratuity is payable only after 5 years (non-taxable). If gratuity is included and deducted from your monthly gross salary, then maybe you can claim it as taxable at the time of leaving (before 5 years). But this will depend on the organization's decision.

Hi, there is a provision in the Shops & Estb. Act (Andhra Pradesh in particular) which says that for every completed year of service, the employer has to pay 15 days' salary on the last pay of the employee. Check whether the same provision is applicable in your respective state.

Thanks,
AR Sai

I do agree with the view that if CTC includes gratuity, then it is considered as income of an employee and should not be treated as welfare or social security by an employer. However, I would like to bring attention to all my HR friends: when calculating CTC, keep the gratuity separate and mention in the appointment letter "Payment of Gratuity as per the Gratuity Act."

SANJEEV

Gratuity calculation formula is as follows: (Gratuity = Basic + DA / 26 * Number of years of Service * 15). Can you please explain this calculation, especially what does the last *15 signify?

Rajesh

Dear All,

In my view, it should not be added to the CTC as it is not guaranteed if any employee resigns before completing 5 years of service.

Thangavel S
Sr. Executive - HR
99943 43043

Hi all,

Although, as per the Gratuity Act, a person shall be eligible for entitlement of gratuity after completion of continuous service of 5 years, but as per my understanding, if an employer includes gratuity as a part of monthly remuneration, then the employer is liable to pay the gratuity amount that was deducted because it is the amount of an employee's salary that has been deducted. This practice, although adopted by most companies, lacks clear judgment and precedence from any court. In such a case, one thing that can be done is to file an application to the Labour Welfare Board of the concerned state because if the employer is not paying, it may be treated as unpaid accumulation with the employer according to my opinion, which shall be referred to the Welfare Board. Alternatively, one should file a PIL on this point before the High Court, and I am very confident that it will be in favor of the employee.

Sanjay Malik
Advocate

Hi,

Regarding your query, I would like to enlighten you that as per the Gratuity Act, gratuity payable to an employee cannot be a part of the salary. In your case, it also cannot be a part of CTC as it is not paid monthly in the salary.

Secondly, gratuity is payable only after the completion of 5 years of continuous service. If you fight legally, you can claim it easily because your CTC was designed by your company with a clear-cut malafide intention. Anything designed with malafide intention never stands legally.

Thanks,
Paramjit

So go ahead and take up the matter with the appropriate authority if you are interested.

Dear Shikha,

If Gratuity is included in CTC, then it has to be paid to employees in Full & Final, even if he leaves within 5 years as it is a part of the income of the employees. In my previous organization, Gratuity was included in CTC. It was paid to me for a period of 1.5 years at the time of leaving. If Gratuity is not paid to the employee, then it is a loss to the employee.

Regards,
Nimish Joshi
9969526325

Dear All,

Gratuity cannot be included in the CTC part. Even though it is included in CTC, the employer has to pay the gratuity to the employee for completed years of service.

Regards,
Nimish Joshi

Dear Rajesh,

Let me explain the formula for calculating Gratuity.

What is 26: Standard working days in a month (after excluding 4/5 Sunday(s)).

What is 15 = 15 days' salary per year as gratuity.

Regards,
Anil