Hello Rasna,
Gratuity is a retirement benefit offered by the company to its employees based on the duration of the service. Incorporating gratuity in the Cost to Company (CTC) is a common practice in India. Here is how you can add gratuity to the salary breakup:
1. Calculation: Gratuity is calculated as per the formula: (Basic Salary + Dearness Allowance) * 15/26 * Number of Years of Service. Companies often consider an average tenure of 5 years to compute the gratuity amount. Please note that this is subject to an employee working continuously for 5 years with the same employer.
2. Inclusion in CTC: Once you have calculated the gratuity amount, divide it by the number of working days in a year (usually 240 days). This gives you the daily gratuity which you can include in the CTC.
3. Updating Salary Breakup: The calculated gratuity can be added in the salary breakup under the head 'Gratuity'. This will be a part of the CTC but not the monthly take-home salary.
Please note 📝: As per the Payment of Gratuity Act, 1972, the gratuity is payable only on an employee's resignation or retirement. If the employee does not complete 5 years of continuous service (except in case of death or disablement), she/he is not eligible for gratuity payment.
💡 Tip: Always communicate clearly with employees about the components of their CTC. The employees should be made aware that gratuity is part of their CTC but not a part of their monthly take-home salary.
I hope this helps. If you have any more questions, feel free to ask.