Gratuity Undertaking Form: Is It Feasible for Every Employee in a Small Company?

Dear Experts,

I work with a small company as an HR. From now on, management wants an undertaking form from every employee as per the attached document. We have already included the same requirement in the CTC. Can we proceed with this, or is it feasible? Please assist in this matter as soon as possible.

Thank you.

This undertaking will not withstand scrutiny under the law of the land. The Contracts Act clearly states that you cannot agree to something that is contrary to the law in force at that time on that subject. When the Payment of Gratuity Act prescribes the payment of gratuity as per the provisions given in that act, you cannot circumvent those provisions by taking an undertaking to the contrary from the employee.

What is the content of the undertaking? It is important to know this to suggest the right course of action.

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Hi, thank you for your question. In order to provide you with the most accurate guidance, it is important to understand the details and specifics of the task or responsibility at hand. By knowing the contents of the undertaking, we can offer tailored advice and recommend the best course of action for your situation. Feel free to share more information so we can assist you effectively.

The undertaking will not stand in the court of law.

Gratuity will be payable as per the provisions of the Gratuity Act.

To my knowledge, this company includes the gratuity provision amount in their CTC package. However, the company pays gratuity as per the Payment of Gratuity Act. The reason for this undertaking is that the employee should not demand the gratuity provision amount from the employer on a monthly basis as it has been shown as part of his/her CTC. Companies generally indicate the amount they set aside for gratuity provision as per the book of accounts. On the other hand, the CTC package will increase owing to the addition of this gratuity payment amount provision.

In my opinion, the company need not show it as part of the CTC package and indicate that the employee will be paid gratuity as per the provisions of the Gratuity Act. The company may not be legally wrong in mentioning the gratuity provision as part of CTC as long as they pay gratuity to their employees as per the provisions of the Gratuity Act.

Regards,

MVK