Gratuity Deduction Dilemma: Can I Reclaim My Money if I Leave Early?

I have joined a company, and they are deducting gratuity from my CTC. However, I am not planning to work in this organization for 5 years. Is there any chance I can get back the amount that has been deducted from my salary when I leave this organization? Please suggest any act so that I can question my company.

Gratuity is a monetary amount payable to the employees of an organization under the Payment of Gratuity Act 1972, subject to the completion of continuous 5 years of service with the employer. Employers are not supposed to deduct gratuity from your salary and then pay it to you. As per my understanding, your company should have some tie-up with insurance companies for a Group Gratuity Scheme, for which the company pays a premium. Whatever premium is paid by the employer for you might be shown in the CTC as the overall cost incurred by the employer for you.

If the gratuity amount is deducted from the gross salary, then you have the right to claim it back. However, the insurance premium paid by the employer and shown in the CTC cannot be claimed back. If you complete 5 years, the employer will pay you the gratuity.

Hi, thanks for your point, but I don't think my company is paying any insurance premium. Is there any act I can refer to in order to get back the deducted gratuity amount?

Whether your employer is making the payment to the insurance company or not, once you become eligible for Gratuity (after a continuous service period of 5 years, after relieving), your employer is liable to pay you the Gratuity at any cost, either on their own or through the insurance company. You cannot claim the monthly premium which is shown in your CTC. Gratuity alone you can claim as a matter of right once you become eligible.

Understanding CTC and Gratuity
CTC is the expenditure or the amount that the employer spends for the employee and is a much broader concept than 'pay' or 'salary' as legally defined in terms of the extant norms in force in the country. The amount shown as 'cost' towards gratuity (as and when payable or if at all payable) does not amount to a deduction, as legally understood.

Understanding Gratuity Deductions from CTC
This is the issue when payroll is processed from CTC. In CTC, everything is included (gratuity also). Therefore, on the earning side at CTC, gratuity appears, and on the deduction side, it is deducted as it is not payable with the monthly salary.

Whether gratuity is paid by insurance or by the company, it has nothing to do with it.

Payment of gratuity will be as per the PG Act, i.e., 5 years of continuous service.

Regards, S K Bandyopadhyay

Yes, this is the main concern these days: companies that do not care for their employees, neither motivate them nor treat them as a liability, usually follow this trend.

These companies, at the time of joining, show employees a higher CTC. However, as the employee may not be very knowledgeable in this area, they may think the CTC is good without realizing that gratuity is payable as per the Gratuity Act (after 5 years).

In most cases, if an employee feels cheated in this regard, they usually approach the court for a Recovery of Money case, and companies often settle these cases.

The respective Labor Departments should provide guidelines to organizations in this area.

Hence, if you believe you have nothing to do with the company you have left, you can file a recovery suit against the directors of the company and avoid approaching the respective Labor Department.

Gratuity is only payable to an employee upon their exit from the services if they have completed 5 years of continuous service. You are not eligible for gratuity if your service is less than five years. The CTC is something else, which is simply the cost to the company for making provisions in the account.

Please note that you can claim gratuity upon your exit from the company before completing 5 years of service, provided you contributed from your wages monthly to the gratuity account. Check your payslip to see if any deductions have been made in the deduction column (Basic + DA + other Allowances) - (EPF + ESI + other statutory deductions) = Net salary.

Further to my earlier post and the query raised by the original post, it appears to me that payroll from CTC (monthly) is confusing as shown below:

Basic - 10,000. HRA - 4,000, OTHER ALLOWANCES - 6,000, Employer Contribution to PF - 1,800, Employer contribution to ESI - 650, Gratuity - 480, Statutory Bonus - 1,000. CTC - 23,930.

Now while processing payroll on the earning side, all the above are shown, but on the deduction side, it shows - Employer's portion of PF, Employee's portion of PF, Employer's portion of ESI, Employee's portion of ESI, Gratuity, Bonus, and PTAX if any. Net salary is Gross earning minus gross deduction.

It appears that gratuity has been deducted from the employee's salary, but actually, it is not.

Therefore, in my opinion, payroll should be processed from the Monthly Gross salary, which should be in this case Basic, HRA, and Other allowances = 20,000/- per month and the deduction.

S K Bandyopadhyay (WB, Howrah) CEO - USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] USD HR Solutions – To Strive towards excellence with effort and integrity