Understanding Gratuity: Is It Really Included in Your CTC Package?

Is gratuity part of the CTC? Please confirm.

Hi, The answer is NO.

Gratuity and Salary

Gratuity is paid over and above the normal salary. It is paid in recognition of long and meritorious services rendered by the employee for a continuous period of 5 years and above.

Group Gratuity Insurance Plan

Many employers opt for a Group Gratuity Insurance Plan to manage the sudden gratuity liability of the organization. According to the terms of the Group Gratuity Policy, the employer makes annual contributions to protect the gratuity benefit. To project the total cost incurred for an employee, the employer adds a value in the CTC of the employee (calculated on a per-employee basis), which is shown as gratuity. This doesn't mean that the employer is deducting gratuity from the employee's salary; it is only for CTC projection.

Eligibility for Gratuity

If the employee completes 5 years of continuous service at the time of separation, the employer pays the gratuity through the insurance company. In case of resignation before the completion of 5 years, the employee will not be eligible for gratuity.

Understanding CTC and Gratuity

There is no legal definition of CTC. Therefore, it varies randomly from organization to organization. In some organizations, gratuity is part of the CTC, and in others, it is not.

Components of CTC

CTC, as per the concept and in my opinion, should encompass all costs spent by the organization for any employee. All payments and facilities are conditional. Conditions include gratuity in a normal case after 5 years of continuous service, salary/wages at the end of the month if the employee is absent throughout the month and has no leave in their credit; it will be without pay, statutory bonus at the end of the year with eligibility requiring a minimum of 30 days present in the year, etc.

Regards, S K Bandyopadhyay

Dear Citehr Colleague,

There is no "Yes" or "No" answer. In the corporate sector, to make offers more lucrative or otherwise, there is a practice to write all direct elements of salary components as a part of CTC. Assuming that the employee will continue with the organization for 5 years or more, it is considered a part of CTC. However, a star-marked remark is generally mentioned in the CTC sheet that *Gratuity is payable as per the provisions of the Payment of Gratuity Act, 1972. Hence, if you are going to stay for more than 5 years, you can take it as a part of your total CTC; otherwise not.

Regards,

Dr. Kamlesh Agrawal
Mumbai

It can't be a part of CTC, as the gratuity will be paid after the completion of 5 years, except in the case of death. Hence, it need not be a part of CTC. Either the employee or the employer can provide a guarantee for five years of continuing service at the time of joining.

Dear All,

Gratuity is not a part of CTC.