Is It Fair to Include Gratuity in CTC and Withhold It If I Leave Early? Seeking Advice

I joined my previous company on 6th December 2018. In my appointment letter, the gratuity amount of Rs. 818 was mentioned as part of my CTC to align with my expected CTC. I was compelled to resign in August 2022, and my last working day in the previous company was 30th September 2021.

My question is, is it legal to specify a flat rate gratuity in the appointment letter and include it in the CTC? As far as I understand, the CTC represents my hard-earned income, while gratuity is a token of appreciation from the company. The gratuity component should not be integrated into the CTC.

Currently, my previous company is withholding this gratuity amount since I did not complete five years of continuous service. I seek advice on the steps to take to recover the withheld amount.

In India, the Payment of Gratuity Act, 1972 governs the payment of gratuity to employees. According to the Act, an employee becomes eligible for gratuity only after completing five years of continuous service with the same employer. Since you resigned before completing the required service period, your previous company is legally allowed to withhold the gratuity amount.

To address this situation and seek the withheld amount, you can take the following steps:

1. Review Employment Contract: Examine your appointment letter and employment contract to understand the terms related to gratuity and CTC inclusion.

2. Seek Legal Advice: Consult with a labor law attorney or legal advisor to understand your rights and options under the Payment of Gratuity Act.

3. Contact HR: Reach out to the HR department of your previous company to discuss the withholding of the gratuity amount and inquire about the company's policies regarding such cases.

4. Formal Request: Submit a formal written request to the HR department requesting the release of the withheld gratuity amount, citing relevant labor laws and your employment contract.

5. Mediation: If direct communication with the company does not yield results, consider involving a mediator or labor union representative to facilitate discussions.

6. Legal Action: As a last resort, if the company continues to withhold the gratuity amount unlawfully, you may need to consider legal action through the labor court to claim your rightful dues.

It is essential to approach this matter with a clear understanding of your legal rights and obligations to navigate the process effectively.