Gratuity Payment [Thread 439970]

Dear Seniors
I have a doubt on gratuity payment. Who is suppose to contribute gratuity amount? employee or employer ? If the employer promises to pay salary of INR 80,000/- per month. The gratuity amount that is 4.33 % of the basic, will it be deducted from the employee salary or it will be contributed by the company?
plz explain...
Rgds
Jay

Hello Jay,
A very controversial question. First thing first, it is the company who pays Gratuity to employees who have completed 5 years of continuous service.
There are 2 methods prevailing in the industry.
First, gratuity is considered as a component of CTC & is included at 4.81% of basic. Companies do so as they consider that every penny spent on an employee is considered as cost to the company.
Second, it is not included in CTC & is paid to employees who complete 5 years of continuous service at the time they leave the organization.
Hence, it is NOT deducted from employees salary but showed as a part of CTC. Hope you understood.

Though company is showing Gratuity in CTC, Its mandatory for employer to pay Gratuity after 5 years of service completion, kindly confirm.

Hi,
In normal course what ever employer spend for employer like employer PF, Gratuity premium payable LIC etc is being added to CTC of the employee. When employee completes five years of continuous of service with same employer, Employer has to pay Gratuity for employee compulsorily at the time of separation.