Can Gratuity Be Included in CTC? Understanding Its Implications and Legalities

Gratuity as Part of CTC

Can gratuity be shown as part of CTC? If yes, what are its implications and repercussions? Also, if we show gratuity as part of CTC, is it compulsory to pay irrespective of the completion of 5 years, as suggested by our consultant, which I have doubts about.

Thank you.

You may consider gratuity as part of the Cost to Company (CTC) for your employees. However, if any employee qualifies for gratuity under the Payment of Gratuity Act, you need to pay them without fail.

Many companies that have different plans from insurance companies pay regular EMIs to those institutions; therefore, they consider gratuity as an integral part of CTC. In the event that an employee dies or becomes permanently disabled, you need to pay them regardless of whether five years have been completed or not.

Warm regards,
Umesh Chaudhary
Regards

The CTC concept is introduced to budget the liability of an employee in the organization during the financial year. It is factual in nature but not exact. The Gratuity is applicable to all employees in terms of the Act. It will be paid without fail to the employee when he/she becomes eligible (even if not shown/mentioned in CTC).

In the CTC, the direct and indirect burdens on an employee are shown. The Gratuity can be shown in the CTC because it is a direct/indirect burden on the organization. Some employers have the policy to make provision of a certain amount against the Gratuity Liability, and some have a Gratuity Term Insurance Policy with HDFC, LIC, etc. Insurance Companies. Yearly/Monthly, the employer has to pay the premium to the Insurance company against the GTI Scheme.

Regards,
Madhav Kalele