Understanding Gratuity and Retention Bonuses: What Are Your Rights as an Employee?

Hello, can anyone tell me what gratuity is and what the law is regarding the same?

I also want to know if gratuity is part of the CTC of the employee or if the employer has to give it over and above the CTC of the employee.

Additionally, when a retention bonus is part of CTC and one is supposed to receive it after one year, but the person is laid off in 10 months, can that person claim the bonus that is part of their CTC?

Understanding Gratuity and Legal Aspects

Gratuity is a benefit given to employees as a token of appreciation for their service. To understand the legal framework regarding gratuity, it is advisable to refer to the Gratuity Act.

Gratuity and Cost to Company (CTC)

I also want to know if gratuity is part of the CTC of the employee or if the employer has to give it over and above the CTC of the employee. It can or cannot be part of CTC; it depends upon the employer.

Retention Bonus and CTC

Additionally, when a retention bonus is part of CTC and one is supposed to receive it after one year, but the person is laid off in 10 months, can that person claim the bonus that is part of their CTC? You need to check your appointment letter clause for the retention bonus amount realization.

Understanding Gratuity

Gratuity is given by the employer to an employee for the services rendered by them. It is usually paid at the time of retirement, but it can be paid earlier provided certain conditions are met. A person is eligible to receive gratuity only if they have completed at least five years of service with an organization. However, it can be paid before the completion of five years in the event of the death of an employee or if they have become disabled due to an accident or disease.

Gratuity Calculation Formula

The formula is as follows: (15 x last drawn salary x tenure of working) divided by 26. Gratuity can be paid on a monthly basis, and it is part of the CTC.