Gratuity Confusion: Can I Claim It If I Leave My Job in 2 Years?

I just want to clarify this: in my latest appraisal form, my company has mentioned Gratuity as a separate component and added it to my CTC. I have completed one year, and based on some calculations with my basic pay, they have arrived at 11,538, i.e., 20,000 is my basic salary, which is multiplied by 15 and divided by 26.

So, if I'm going to leave this company in the next 2 years, will I be able to claim this amount? Or will I not get this amount?

Expecting some experts to reply to this.

You are eligible for gratuity only when you have completed 5 years of continuous service. If you leave the organization before that, you are not eligible. For any clarification, feel free to write or discuss.

Regards

You have mentioned that you have completed one year. After two years, that will become three years. However, as per the law, you are only eligible to receive gratuity if you have completed five years of service. Therefore, after two years, you will not be able to claim your gratuity amount.

Thank you!

I agree with all the replies above. As per Section 4 of the Payment of Gratuity Act, an employee who has completed 5 years is eligible to receive gratuity after retirement, termination, superannuation, or death. The only exception is if the person dies before completing 5 years, then his nominees are entitled to receive the gratuity amount.

You are eligible for gratuity only when you have completed 5 years of continuous service. If you leave the organization before that, you are not eligible. For any clarification, feel free to write or discuss.

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Gratuity and CTC Clarification

What has been stated by Shri Prasenjit Ji Mitra is the provision in the Payment of Gratuity Act, 1972. However, I have seen some instances in which different employers deduct the gratuity component from the monthly salary of their employees on the grounds that it is part of the CTC. There is no provision in the Payment of Gratuity Act, 1972 for the recovery of the gratuity component from the salary of the employees. It is to be paid by the employers to the employees who complete more than 5 years of service honestly. In the case of the death of the employee, the condition of a minimum of 5 years of service is not applicable. It is payable irrespective of the period of service from the employer's own funds. If the gratuity is recovered from the employees' monthly salary, I feel it should be payable even if some employees do not complete five years of service. Seniors and experts may please offer their comments on this issue.

The original poster may also clarify whether his employer recovers the gratuity component or if it is just being shown in the CTC for accounting purposes.

I agree with Mr. Shyam Agrawal. I have seen employers deducting gratuity from the very beginning of employment. However, as per the clause in the HR Manual, it can only be given back after the completion of 5 years when the employee leaves. So, how can one claim it?!

Many organizations include gratuity as part of the CTC. In my previous employment with an MNC, we used to include the gratuity amount in the CTC. Since the payment of gratuity is a cost to the company, many organizations include it in the CTC. It is not deducted; instead, the amount is kept as a reserve and paid to the employee only if they leave the organization after completing five years. If an employee leaves before completing five years, they are not entitled to that amount.

In the case where Arun decides to leave the organization within two years, he will not receive the gratuity amount included in his CTC.

Regards,
Sumeet

Clarification on Gratuity Deduction and Payment

Dear friends,

What has been stated by Shri Prasenjit Ji Mitra is the provision in the Payment of Gratuity Act, 1972. However, I have seen some instances in which different employers deduct the gratuity component from the monthly salary of their employees on the grounds that it is part of the Cost to Company (CTC). There is no provision in the Payment of Gratuity Act, 1972 for the recovery of the gratuity component from the salary of the employees. It is to be paid by the employers to the employees who complete more than 5 years of service honestly. In the case of the death of the employee, the condition of a minimum of 5 years of service is not applicable. Gratuity is payable irrespective of the period of service from the employer's own funds. If the gratuity is deducted from the employees' monthly salary, I believe it should still be payable even if an employee does not complete five years of service. Seniors and experts are invited to offer their comments on this issue.

The original poster may also clarify whether the employer recovers the gratuity component or if it is just shown in the CTC for accounting purposes.

Dear Friends,

It is true that some companies deduct amounts towards gratuity from employees, but they do pay the amount when the employee leaves the company, regardless of the duration of their employment.

Regards,
Shyam Agrawal

Gratuity Deduction Clarification

No employer has the right to deduct the gratuity amount from the salary of the employee. It must be paid from the employer's pocket after the employee's retirement, superannuation, or death. If any employer has deducted it, they are liable to return the entire deducted amount with a 12% interest as per the latest Supreme Court judgment.

Regards

Dear Arun,

It is correct that you will not be paid any Gratuity amount if you leave an organization before completing five years. However, some companies do pay Gratuity to employees who have worked for 240 days in a year. This means if you have completed service for 4 years and 8 months, but have worked or been paid salary for 240 days in those 8 months, then they count those 8 months as one year and pay Gratuity accordingly (i.e., 5 years x 15 days).

Regards,

Gratuity Eligibility and Calculation

As stated by Mr. Shyam Agarwal, gratuity cannot be deducted from an employee's salary; that's against the law. Gratuity has to be paid to an employee who has completed 5 full years at the time of their exit from the organization. For any period in excess of 5 years, if the balance period is less than 6 months, it should be ignored. If it is above six months, it should be treated as 1 year.

For example: If an employee, X, leaves the company after 5.4 years, it means they are eligible for only 5 years. If they leave after 5.7 years, they are eligible to receive gratuity for 6 years.

Any more inputs are welcome.

Regards,
M. Karthik HR

Eligibility for Gratuity for Employees and Contract Workers

Suppose the same employee, after three years without any break, is eligible to receive gratuity. Are contract employees eligible for gratuity if they provide continual service for five years? In general, how much break may we give for contract employees?

Regards

Gratuity Deduction in CTC

I too have the same doubt. In the CTC part, gratuity is deducted by most companies. Is there any criteria for deducting it in CTC?

Regards,
Munaf

May I have a copy of the judgment of the Supreme Court regarding gratuity? (i.e., No employer has the right to deduct the gratuity amount from the salary of the employee. It has to be paid from the employer's pocket after his retirement, superannuation, or death. If any employer has deducted that, he is liable to give back the entire deducted amount with 12% interest as per the latest Supreme Court judgment.)

Gratuity Deduction and Appraisal Concerns

No employer has the right to deduct the Gratuity amount from the salary of the employee. It has to be paid from the employer's pocket after retirement, superannuation, or death. If any employer has deducted that, they are liable to return the entire deducted amount with a 12% interest as per the latest Supreme Court judgment.

Thanks for your reply. As I mentioned in my post, it was added to my CTC in the latest appraisal form. Hence, while calculating my appraisal percentage, this is also getting added, which I would never receive unless I serve here for another 3.5 years. So, is this the right way for the company to proceed?

Dear Arun, your company is not handling the gratuity correctly. They do not have the right to add and deduct gratuity from the CTC.

According to my knowledge, gratuity should not be deducted from the employee's salary, meaning the gross salary. There is a significant difference between gross salary and CTC. Whatever the employer's contribution, it is in addition to the gross salary. Hence, the company has the right to show it as CTC and not in the gross salary. Here, the companies are not doing anything wrong at all.

Regards,
Raju

Understanding Gratuity and Its Impact on Salary

According to my knowledge, gratuity should not be deducted from the employee's salary, meaning the gross salary. There is a significant difference between gross salary and CTC. Whatever the employer's contribution is, it is in addition to the gross salary. Hence, the company has the right to show it as CTC, not in the gross salary. Here, the companies are not doing anything wrong at all.

Regards,
Raju

Clarifying Gratuity in CTC

I have one more point to add to this discussion. If employers are showing the gratuity component in CTC (cost to company) for cost accounting purposes, it is to be paid at the end of one's service after the completion of five years (with exceptions in case of death) at the rate of the last pay then prevailing. In the CTC, it is perhaps being shown at the current rate of pay. Then how would they match the difference between one's salary now and after ten or fifteen years? As pointed out in the discussions above, some companies are merely showing the gratuity component in CTC for cost accounting purposes, while some are perhaps ignorantly recovering it from the employees' monthly salary. This needs to be examined carefully, and a workable solution arrived at satisfying the larger community.

I hope this helps clarify the matter.

Best regards,
Raju