Gratuity for 3 Years of Service: Are Companies Required to Pay It?

Gratuity Payment Rules for Employees with 3 Years of Service

Is there any rule regarding gratuity if an employee has worked for a total of 3 years and is demanding gratuity, especially when the company's CTC letter mentions gratuity? Is there a rule that requires the company to pay gratuity for 3 years?

Dear Divya,

In India, gratuity is a statutory terminal benefit of employment solely payable by the employer without any monetary contribution from the employee once the Payment of Gratuity Act, 1972 becomes applicable to the employer's establishment. Thus, the PGA, 1972 is the complete Code in itself in respect of all matters pertaining to gratuity.

On the other hand, CTC is an accounting aide projecting the overall annual cost incurred by the employer in respect of each employee. Therefore, CTC, per se, cannot be considered as forming part of the contract of employment. The contents of the CTC can help the employer to have an upper hand in bargaining during salary negotiations. Hence, mere mention of the annual contribution to any gratuity fund by the employer cannot entitle an employee to stake a claim for gratuity when he has not rendered the minimum qualifying service stipulated under the PGA, 1972.