Confused About PF and Gratuity in My Job Offer: Do They Affect My Take-Home Pay?

In the offer letter that I received from a company, there are two components in the fixed compensation structure: PF and Gratuity. I have the following queries:

1) If PF for the month is, for example, Rs 5000/-, does this amount get deducted from my monthly salary?

2) Can Gratuity be added as a salary component as I have not come across it in previous companies?

3) If Gratuity for each month is, for example, Rs 5000/-, does this amount get deducted from my monthly salary?

Looking forward to your reply.

Regards,
skka

In respect of P.F., only the employee's (your contribution) will be deducted from the salary, but not the employer's contribution. Gratuity cannot be deducted from your salary nor paid to you every month along with the salary. However, it is observed that employers are showing gratuity in CTC as a cost to the company. But it is payable upon your leaving the service after the completion of five years of service.

Regards,
B. Saikumar
Mumbai

Also, just to add to Sai sir's view, though the employer cannot deduct their contribution to the PF from your gross salary, they can show it in your CTC as a record. The reflections would be as follows:

Salary Components

- Basic
- DA
- HRA
- Conveyance
- Medical Allowance
- Food Allowance (if any)
- Other Allowances

=====================
GROSS
(x) 12
=====================
ANNUAL GROSS

Additional Components

- Gratuity
- Employer's contributions (PF, ESIC, Insurance - if any)
- Bonus
- Other costs incurred

=====================
CTC
=====================

And note that:
GROSS
(-) Professional Tax (as per your slab and city)
(-) Your contributions (to PF, ESIC, and others)
(-) TDS

=============================
IN HAND

I hope this would clear your doubt.

Gratuity Payment and Salary Deductions

Gratuity cannot be deducted from your salary nor paid to you every month along with your salary. However, it is observed that employers are showing gratuity in CTC as a cost to the company. It is payable when you leave the service after completing five years of service.

Understanding EPF and Gratuity

Common, Yaar, this is too much. You should know first what is EPF (Employee Provident Fund) and what is Gratuity?

What is EPF?

EPF is a benefit created by the Central Govt. for all employees irrespective of their category. Your company will deduct 12% of your basic salary (as per the PF rules), and equally, the company will also contribute and remit it to the PF local office or bank. Nowadays, this is done online. Upon your resignation, regardless of your length of service—whether it is 3 months, 3 years, or 30 years—you can withdraw this amount after filling out the necessary forms, which should also be authorized by your employer after your resignation or retirement.

Understanding Gratuity

Gratuity is a benefit that the company should provide to its employees at the time of resignation. However, the employee must have completed 5 years of service with the same company. Importantly, there is no deduction from the salary of any employee towards Gratuity. The company should give you this Gratuity on the day you leave the company.

Regards,
Venkat, Bangalore

PF Contribution Details

PF contribution depends on your basic salary. The company will deduct 12% of the basic salary towards PF and will contribute 13.61% towards PF.

Regards,
Sandhya HR Executive