Understanding CTC and Gratuity in India
There is no word called CTC under any law in India, but it is a derived term denoting the cost the company would incur by employing one person by way of fixed salary, statutory contributions payable monthly, annually, or at any date which may even fall when the employee is superannuated, variable pay like incentives, commissions, etc., and may include amenities provided by the company like quarters, cab facilities, subsidized food, etc. Therefore, CTC should not be taken as a salary payout but should be taken as a cost to the company by all means.
Gratuity as a Cost to the Company
As gratuity is a payment which may fall due when the employee leaves after putting in a service of at least five years, the same is also a cost to the company. The employer is under a legal obligation to provide for a gratuity fund every year based on actuarial valuation. It should be remembered that paying gratuity is mandatory in case of the death of an employee without completing the qualifying period of five years, and providing for gratuity every year will make the company safer with regard to finance in such occasions.
CTC and Salary Deductions
Normally, CTC is an offer and will not be reflected in the salary sheet, nor will any amount be deducted from the salary of the employee every month. But in case the salary slip contains gratuity as a deduction from the salary, it should be payable to the employee once he leaves even without completing the qualifying period of five years.
Regards,
Madhu.T.K