Gratuity For 1 Year Contract

Dear all,
I have got an offer letter from an organization for a 1-year contractual employment. The contract may be extended subject to my satisfactory performance and organization's needs. In salary break-up (CTC), organization has mentioned that gratuity will be deducted. However, if my contract is not extended, then I will surely loose my gratuity contribution. And even if contract is extended for 1 or 2 years, I will still not receive my gratuity. So my question to members is: Why organization is accounting for gratuity payment in CTC while it is very clear in offer letter that the offer is for only one year?
Looking forward to your inputs..

Dear Sean123,
CTC concept is discussed in this forum on many occasions. You need to understand first the concept of CTC and CTC & salary. Please note that CTC is different than salary.
I am giving below one of the links on this subject for your ready reference.
https://www.citehr.com/453456-pf-con...ncashment.html
You can browse the subject and find many such links / discussions which may clear your understanding on the concept of CTC and salary.

Truly an awesome question. Gratuity is only deducted if there is no contract. If there is a contract then gratuity component is not there.
If company is throwing you out, then they have to pay the gratuity, its a law.
Hope it helps
Thanks
Deepa
Blogs - Famous Great All In One

Hi,
I agree to the facts that some of our friends have posted w.r.t calculating Gratuity in the Cost to Company. On one side CTC refers to every cost borne by the employer towards the employee, which includes employers contribution to Provident Fund, ESIC, Mediclaim, Gratuity etc.
But technically if we look at a point that Gratuity is payable in event of completion of 5 years in service or in unfortunate event of Death/Disability during working. And gratuity is calculated on Basic Salary + Dearness Allowance which is at the time of completion of 5 years or in event of Death/Disability.
The point that I want to make is that how can we calculate & deduct Gratuity, when we don't know what the Basic Salary + D.A will be on completion of 5 years or in event of Death/Disability.
Regards:
Vivek Sharma.
HR Manager.

Hi
Many organizations where CTC concept is followed and gratuity is part of the ctc, if an employee is left the organization before completing 5 years, accumulated such amount is paid as ex-gratia. Employees are not loosing any amount which is shown in the CTC statement.

Gratuity is paid by the organization "in gratitude" for his/her service for at least 5 years in the organization .
There is no contribution from the individual's side .
Regards,
Srinivas

Dear all,
Thanks all of you for your inputs.
I don't have any intention to stretch this thread long enough. But the point that I wish to highlight is that, for example, an organization is offering a CTC of Rs. 5 lakhs on paper (which includes PF, Med., Gratuity, etc.) out of which gratuity is, say Rs. 10,000 p.a. Since the contract is for one year only (although with a possibility of extension for 2-3 years), so practically the possibility for an employee to realize that Rs. 10,000 is literally zero. Hence, the actual CTC is Rs. 4.9 lakhs instead of Rs. 5 lakhs, as claimed by the employer. I hope this clarifies my point.

hi
if anybody explain that in a company they are not giving gratuity benefits to the employees is it legally correct

Dear Sean123,

I apprecIate your post.

As I said CTC is a concept and that is adopted by employer. What is to be considered as cost to him, it is his prerogative.

The employer has to make provision for gratuity every year and need to include all the employees in it from first day of their employment irrespective of their tenure. The employer is require to invest in Gratuity Fund according to the provision. Therefore employer takes this amount invested per employee as a cost in CTC structure.



Employer is not wrong in considering this cost in CTC structure. But, I feel the employer is invariably not conveying this concept to employees properly. Rather I say HR fraternity has not understood this concept and they have no interest also to understand it as what I have seen, the reason best known to them.

You being an employee, you should concern with your salary package. However at the time of salary negotiation during interview one has to negotiate CTC visa-vis his CTC with earlier employer and demand accordingly. HR man should play his role skillfully. But if he is in confused mind.....?

Dear,
Gratuty is such an additional payment which can be availed after completion of atleast 4 years and 240 days.
Whether the employment is permanent or on contract, if some one has worked in an Organisation atleast the above days subject to without any service brakeup is eligible to avail the benefit.
And about CTC-Cost To Company is such a sentence which has no legally justified defination. It is a calculation which includes every direct and indirect expences bearing by an Organisation towards a particular Employee during a financial year and every Organisation has their own way of calculation. Frankly speaking it a very diplomatic sentence, which is as good as bad.