Confused About Gratuity in CTC: How Should It Really Be Handled in Salary Packages?

Greetings to all Seniors, I recently joined a trading company as an HR Generalist in Faridabad. I found some flaws in our company's current salary structure. Gratuity is a part of CTC, and it's over and above the gross salary. In addition to gratuity, bonus, and leave encashment are also part of CTC. Due to this, many employees have confusion and dissatisfaction about their salary package—what they were offered versus what they are receiving as their in-hand salary.

Confusion About Gratuity in CTC

Now, I am confused! Can gratuity be a part of CTC? What is the legal framework for this? I always understood that gratuity is a form of loyalty bonus for employees who have worked for more than five years in a company, and there should be no deduction from the employee's salary on a monthly basis. However, here in our company, it appears as a deduction being part of CTC.

Please help me with your valuable replies so that I can approach our director for the necessary changes.

Thank you,

Rishipal Saini

Understanding Gratuity in CTC

Gratuity is not a part of salary; however, it can be included in the CTC. Some companies are using new ideas to structure CTC. It depends on the company policy, and we need to understand the concept of CTC very carefully. Gratuity is a retirement plan instead of a loyalty bonus.

Regards,
Kamesh

Dear Kamlesh, Thanks for the reply. I agree with the fact that some companies have started applying their innovative ideas regarding gratuity to retain employees by making it a part of CTC. However, there is a query about how to incorporate gratuity and leave encashment shares into the yearly CTC and then into the monthly CTC.

Understanding Gratuity in CTC

From what I have understood about gratuity fixation in CTC, it should not exceed 15 days of basic salary, divided into 12 months equally as a part of CTC. For example, if an employee's monthly CTC is Rs. 20,000 and the basic salary is Rs. 10,000, then the gratuity share in the monthly CTC should be Rs. 417.

Seeking Advice on Leave Encashment

Seniors, please suggest if this is the right way to calculate this. If yes, kindly also advise on how to fix the leave encashment share in CTC.

Thanks in advance.

Regards, Rishipal Budding HR Professional