As per The Payment of Gratuity Act, 1972, Gratuity is an award which an employer pays out of his gratitude, to an employee for his long and meritorious services, at the time of his retirement, or termination of his services. Payment of gratuity is, however, compulsory for employers, subject to eligibility mentioned in the legislation. One of the compulsory eligibility is – “Continuous Service of FIVE Years”.
By definition, Total Cost to Company (TCTC) means total amount payable to an employee or on behalf of employee, directly or indirectly, in a year. Hence, among all other heads, TCTC includes contribution towards Provident Fund (PF), contribution towards Employees’ State Insurance, payment of bonus, variable component of TCTC (performance linked bonus, if bonus), and contribution towards any other benefits payable to an employee in a year.
Hence, deduction towards Payment of Gratuity is legal or illegal? Gratuity becomes payable, if and only if, an employee completes FIVE years of continuous service with organization. If an employee leaves the organization within FIVE years of joining, he is not paid the Gratuity Amount, even though the amount has been deducted from his CTC and kept aside.
Do you think deduction made from the TCTC of an employee towards payment of gratuity, is legal or illegal? Is it ethical?
You can share your thoughts…
By definition, Total Cost to Company (TCTC) means total amount payable to an employee or on behalf of employee, directly or indirectly, in a year. Hence, among all other heads, TCTC includes contribution towards Provident Fund (PF), contribution towards Employees’ State Insurance, payment of bonus, variable component of TCTC (performance linked bonus, if bonus), and contribution towards any other benefits payable to an employee in a year.
Hence, deduction towards Payment of Gratuity is legal or illegal? Gratuity becomes payable, if and only if, an employee completes FIVE years of continuous service with organization. If an employee leaves the organization within FIVE years of joining, he is not paid the Gratuity Amount, even though the amount has been deducted from his CTC and kept aside.
Do you think deduction made from the TCTC of an employee towards payment of gratuity, is legal or illegal? Is it ethical?
You can share your thoughts…