Can Employers Pay Gratuity Monthly with Salary, and What Happens After 10 Years?

Dear Sir/Madam,

Can an employer pay gratuity on a monthly basis?

Can an employer pay gratuity on a monthly basis along with the salary, and have the same component shown in the employee's salary slip?

Gratuity claim after 10 years of service

In the case of a person working in a private company where the number of employees is more than 10,000, and they are paying gratuity on a monthly basis with the same component shown in salary slips, if an employee leaves the organization after 10 years with the last drawn salary being 65,000/-, can they again claim gratuity or not?

An employer cannot pay gratuity on a monthly basis. The gratuity is payable only to those employees who have completed 5 years of continuous service with the company. As such, the question of paying it right from the month of joining does not arise.

If the employer has been showing gratuity in the payslips and paying it every month, the same is not legally maintainable. If the employee demands it upon leaving the company after five years, the company would be constrained to pay it.

It is unbelievable that a company employing 10,000 employees does not have an HR expert who can guide these basic things.

@Madhu-ji, it is not that the company lacks HR expertise; rather, they have chosen this approach to present a higher salary than they are actually willing to pay. They are relying on the assumption that most employees will not contest it. If someone does challenge it, they will quietly settle after delaying for a couple of years.

@Zaffar, if the company pays gratuity monthly, it becomes part of the person's salary (basic), and the company is still liable to pay gratuity when the person leaves. The law clearly states that gratuity is a one-time payment upon separation.

Dear Zaffar,

I wish you had mentioned the logic of paying the employee a monthly gratuity. Is it that when the employee eligible for gratuity leaves, the company has to pay a hefty amount? To offset the sudden load on cash flow, does your company wish to pay in advance? If it is so, then let your company enroll for LIC's New Group Gratuity Cash Accumulation Plan. Click on the hyperlink to learn the details of the plan.

Under this plan, every month your company needs to pay a certain amount to LIC. Not only do monthly payments accumulate the corpus, but your company also gets interest. Once the corpus and interest become sufficiently big, your monthly installment reduces. After a few decades, the corpus becomes so big that even the interest itself takes care of the gratuity, and your company does not have to pay monthly installments either.

In addition to visiting the webpage mentioned above, you may visit the nearest LIC office. The officer concerned will educate you about the payment of the monthly installment.

Thanks,

Dinesh Divekar

Gratuity and Bonus in Monthly Wages

Mentioning gratuity or bonus as a part of monthly wages for computing CTC is acceptable, but indicating it as part of the monthly salary paid is not beneficial. The legal liability to pay them again upon reaching the due stage still exists, even if you have paid it prematurely. Moreover, the calculation of gratuity must be based on the last salary, not the current salary.