Is It Legal for Employers to Deduct Gratuity from Salary? Seeking Advice on Legal Steps

My previous employer included gratuity in my CTC but then deducted the gratuity amount from my salary. I also spoke to HR, but they did not provide any response. After completing 3 years and 6 months on the job, I resigned. However, at the time of the full and final payment, the employer refused to give me the deducted gratuity amount, stating that since I did not complete five years, I am not eligible for the gratuity payment.

I am unsure about what steps to take next. Can I take any legal action regarding this issue? For the past three years, my employer has not settled my dues. Please advise me on the legal options available to me to receive the payment.

Thank you.

Dear Sudhir,

If the said Gratuity amount was mentioned as part of your committed CTC, the same shall be paid to you at the time of separation. If not as Gratuity, then as "ex-gratia," the difference will be that it will attract IT. You can take it up with the labor office in your area or issue a notice through an advocate. The probability of your success is unpredictable.

Shailesh Parikh
99 98 97 10 65
Vadodara

Dear Sudhir,

Even if the employer includes the gratuity amount as part of your Total Cost to the Company, you cannot claim it before completing 5 years of continuous service. As long as the employer is not deducting the Gratuity amount from your wages, there is no problem.

Regards,
Rahul

Yes, I agree with Mr. Rahul.

As per the Gratuity Act, an employee must have completed five years of continuous service to be eligible to claim gratuity.

If any amount is deducted from the monthly salary of the employee by the employer towards gratuity, it is illegal.

Dear Sudhir, I am providing you with an example. Let's consider an employee, X, who worked under the employer, Y, from 01.01.2010 to 30.09.2014 with a gross salary of Rs. 20,000/-. X contributed a total of 3 years and 9 months of service to the company. Therefore, Mr. X is not eligible for gratuity as per the Act.

However, if he had completed 5 years, then his gratuity amount would be Rs. 57,692/- [(15*20,000*5)/26], which is Rs. 962/- per month. The employer may have included this amount (approximately Rs. 1,000/-) in his salary, making the gross amount Rs. 21,000/-. Mr. X might have mistakenly thought that his salary was Rs. 21,000/month and calculated that for the service of 3 years and 9 months, the employer had deducted his gratuity amount of Rs. 43,270/- (Rs. 962/- * 45 months).

It's important to note that this deduction is not illegal; it is simply a matter of perception. Please do not take it personally.

Thanks,
Rakesh Kumar Sahoo

Whether any deduction has happened to your monthly wages on account of gratuity? If yes, then you are eligible to get back the amount from your previous employer. If they do not release it, you may raise a complaint with the labor department.

You would not receive anything if there is no deduction. The gratuity shown as part of your CTC is something different. If no deduction has happened on account of gratuity from your salary.