Whether Gratuity Can Be Deducted Monthly?

Dear All,

I want to understand if gratuity can be deducted, as I have seen so many MNC companies deducting gratuity on a monthly basis which I really think is not a legal practice or at par with the Payment of Gratuity Act, 1972. It is a kind of benefit that the company provides to their employees after 5 years of their contributory services to that organization or post retirement, permanent disablement due to an accident. Therefore, I believe there is no point in deducting it from employees' salary monthly.

Please give your inputs; awaiting for the guidance.

Regards,
Smruti

Dear Smruti,

You are correct. Under the Payment of Gratuity Act, it is an additional benefit/statutory claim for employees. The quantum of gratuity can be computed only upon completion or stoppage of service.

Abbas.P.S

Yes, I agree with the views expressed. Gratuity is a contingent payment, payable on separation. The practice adopted by MNCs - to show it on CTC at the time of joining or to deduct an amount every month - is absolutely incorrect. It shows that MNCs do not understand or comply with the Indian standards/practice, or they have hired HR professionals who are either incompetent or lack the conviction and courage to explain the ground realities to their masters. Warm regards.