Gratuity As A Part Of CTC - Withdrawal Of Gratuity

Dear Seniors,
I have one query regarding Payment of Gratuity.
In many organisation, gratuity is included in CTC and each month it is deducted from the salary. Now suppose if an employee leaves a company without completing 5 yrs. of continuous service, how the employee can claim for the Gratuity?

No claim for gratuity without completing 5 yrs. There is no deduction of gratuity per month, it is just a provision in the books of accounts thru' acturial valuation. Gratuity element is shown in the ctc to calculate the total cost to company of employing one person. hence, u cannot claim gratuity w/o completing 5 yrs service.

Hi,
It depends from company to company and I hope you have taken clarity at the time of joining,
To claim gratuity as per The Payment of Gratuity Act, you must complete services for minimum 5 years including leaves and holidays. However, few organisation who work for employee welfare also allow to withdraw if somebody resign or leave job even before 5 years. For the same, you need to take clarity from your HRD (We allow our employee who leave us before 5 years to claim Gratuity).
If they allow you may apply under form I
http://pblabour.gov.in <link fixed>
About deduction: Many organisation make Gratuity as part of CTC to terming it as a deduction will be wrong. Rather it is a component of the CTC which organisation has to acrue as per AS 16 (Accounting Standard 16) and need to make provision for it. However, organisation is not liable to pay it if employee has not completed service of minimum 5 years

Gratuity Act says that Gratuity is goodwill of an employer to the employee who stays with the organization for longer period.
And the period is 5 years.
In case of death or permanent total disablement employee should be paid gratuity before 5 years.
Actually, gratuity component should not be deducted from the Monthly salary.
If. deducted then the amount deducted should be refunded in resigned cases.

Dear Richard Macwan,
I agree with Sh Dixon that most of the reputed companies create "Actuarial valuation of Gratuity Liability" in order to calculate the total cost to company (CTC) for employing a particular person but the gratuity is payable to the employees only on completion of FIVE years except in case of death or diablement.
BS Kalsi
Member since Aug 2011

Please do not get confused with CTC and Salary. CTC is estimated Cost to the company in employing that person and includes all expenses employer incurs or may have to incur in future for employing an employee. if anything is shown in CTC then that does not mean that it gets deducted from salary.

There cannot be any claims for gratuity without completing 5 yrs. There is also no deduction of gratuity per month, it is just a provision in the books of accounts. The amount is shown in the ctc to calculate the total cost to company of employing one person. hence, u cannot claim gratuity w/o completing 5 yrs service.
In case of death/permanent disability/retirement/retrenchment, it is different. Gratuity is usually paid.

If your cash in hand is being paid as promised, than no one can say that it is deducted rather it is added to count total cost to company.

Dear Sh Seshadri,

I would like to correct you where you have mentioned in the last sentence of your mail that "In case of death/permanent disability/retirement/ retrechment, it is different. Gratuity is usually paid". I would like invite your attention towards Section 4 of the Payment of Gratuity Act,1972, which says that gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than FIVE years (a) on his superannuation, or (b) on his retirement or resignation,or (c) on his death or disablement due to accident or disease. Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

The EXCEPTION for putting in five years service is only available to the cases on one's death or disablement due to accident or disease and not otherwise. In case of retirement or retrenchment, a period of FIVE is necessitated to claim the payment of gratuity.

BS Kalsi

Member since Aug 2011

Dear all,
Good Morning!
Is there any notification or judgement wherein gratuity notification says that we can not add gratuity amount in CTC. If its a part of CTC then can a employee enjoyed without completing 5 years.
looking forward for your prompt response alongwith any Supreme Court Judgement or gratuity notification.
thanks & regards