Confused About Gratuity and PF Rules: Are They Rightfully Part of Our CTC?

I am not sure whether this topic has been discussed before.

Gratuity

I am working for a company that started in 2007. I joined the company in August 2008, and by August 2009, we had about ten employees. In April 2011, we were informed by the management that from now on, gratuity will be applicable to us, and it is being shown as part of the CTC. Is this right? I also want to know to whom it is applicable because I read that I am eligible for gratuity only after the completion of 5 years and if my salary or emoluments are less than 10,000 in a month.

PF

For the last four years, we have been informed that PF is not applicable to our organization since the employee strength is less than 20. This year, we are being told that PF is applicable to us even though the employee strength is 10, and also, the management tells us that both our contribution and the employer's contribution will be shown as part of our CTC. Is this right? And whether we are eligible for PF, and if it is applicable, then should we ask the management also for previous years' PF?

Hoping for some solutions.

Provident Fund (PF) and Gratuity Clarification

Since your establishment has a staff strength of less than 20, PF is not applicable as of now. If your establishment wishes to provide this benefit, you can offer it through Voluntary Coverage to your employees. It appears that your management has already adopted this option. Once voluntary coverage is selected for the establishment, it cannot be reversed. This is a benefit for the members.

Gratuity as a Welfare Measure

Gratuity is also a welfare measure for employees. According to the Act, it becomes applicable once an employee completes 5 years of service in the establishment. However, the Act does not specify that the employer cannot implement the scheme for employees before they complete 5 years of service. This, too, is for your benefit.

Cost to Company (CTC) and Wage Considerations

One thing is clear: CTC cannot be applied to employees whose emoluments are below the minimum wages specified in the relevant schedule of employment. Please review the wage rates in your schedule of employment. The ESI limit is up to Rs. 15,000, and the EPF limit is up to Rs. 6,500. Benefits from labor laws are also capped at Rs. 6,500. Therefore, if your take-home emoluments exceed Rs. 6,500, CTC may be applicable. If you still have doubts, please contact your nearest labor official to address your concerns.

Regards,
Tirupathi Raju/Advocate
Advisor-Labor Laws

Dear Members,

Subject: Gratuity

Please clarify: when calculating gratuity to be paid to employees, we have a salary structure as Basic + HRA + Conveyance. Should the gratuity be calculated on the total of Basic salary + HRA, Basic only, or the total of all three?

Please offer your solutions.

Thanks & Regards,
S. Kannan

Thank you, Mr. Tirupathi Raju, for the solutions. However, I can't understand what happens to the amount deducted from me month on month when there is no gratuity account opened in my name. I think I am relatively better off investing the same amount in some other pension fund with better returns, and withdrawals are also non-taxable.

Regards, Rajeev

Our company was established in 2006, and we have been covered under PF from the inception. However, we are now looking at introducing Gratuity. I have some queries around this:

Gratuity Registration for Multiple Locations

1. If I have offices in multiple locations, is it okay to register only at the place where our head office is located?

Gratuity Registration Process

2. Who do we need to register with, and is there anywhere we can get details of the process/procedure?

Implementation Timeline for Gratuity

3. How long does it take to bring this into effect? Would appreciate responses.

Regards,

Gratuity is eligible for completion of 5 years. If somebody resigns on 20th April 2012 by giving a 60-day notice but completes 5 years on 19th June 2012, and 19th June will be their last day at the job, in that case, will gratuity be applicable for claim or should it be waited for until the resignation on 19th June 2012, i.e., completion of 5 years? Please help/guide urgently.

Regards,
Yuvraj

To add to my question, my management now tells me that PF will be compulsory for us as we are a subsidiary of the parent company. If that is the case, shouldn't the company pay for previous years' PF as well?

Regards,
Rajeev

I worked for a private educational institution for 22 years without a break in service. Recently, I joined another institution. How can I claim gratuity from my previous service? What are the procedures?