Is It Legal for Companies to Deduct Gratuity Monthly? Seeking Clarity and Guidance

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

Please give your inputs; awaiting guidance.

Regards,
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.

Regards,
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.