Dear Kamran,
I am sorry to disagree with you as well as with all my other friends who appear to have agreed that it is unethical, etc. etc. to show gratuity as part of CTC.
If a potential candidate is shown only a lump-sum figure as the amount promised to him, I agree with you that it would be unethical not to pay the amount either on a monthly basis or at the time of leaving (even if the employee leaves before the period of 5 years).
However, if a full break-up is shown to the employee, and the rules for payment of gratuity are disclosed, there is nothing unethical about not paying the amount to an employee who quits before the qualifying period of 5 years.
The law clearly stipulates the conditions under which Gratuity is payable to an employee. If the amount is not taken into account while computing the CTC, it would mean a sudden, unintended jump in the CTC of the employee after he/she completes 5 years. Kindly remember that after completing the requisite period of 5 years, gratuity is payable for the past period, from day 1.
Grauity, by its very nature, is meant to reward service, provided it is given for a minimum period of time. This serves as a retention tool, albeit a rather weak one, and there is nothing unethical about it. Today, there are many incentive schemes, (including stock option schemes) that, once earned, are paid out in stages, provided the employee continues to remain in service for defined period of time.
I maintain that as long as all conditions for payment of a certain amount are disclosed to an employee at the initial stage, and the rules are not changed midway, there is nothing unethical in the said practice.
Gerry303