Good Evening Seniors,
Deductions for Gratuity and Pension Fund from Salary
Can a company or manufacturing unit make deductions for GRATUITY/PENSION FUND from salary? If it is deducted from the salary, then which department should the employer deposit it in? Is this legal? From what I know, it's not a part of CTC, but there are some companies that already make deductions for Pension and Gratuity.
When I asked management about this, they told me it's the right way and that we can deduct it. Hence, I want to know what is the correct approach. Please help me with this. Your early action in this regard will be highly appreciated.
Thanks & Regards
From India, Delhi
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63Deductions for Gratuity and Pension Fund from Salary
Can a company or manufacturing unit make deductions for GRATUITY/PENSION FUND from salary? If it is deducted from the salary, then which department should the employer deposit it in? Is this legal? From what I know, it's not a part of CTC, but there are some companies that already make deductions for Pension and Gratuity.
When I asked management about this, they told me it's the right way and that we can deduct it. Hence, I want to know what is the correct approach. Please help me with this. Your early action in this regard will be highly appreciated.
Thanks & Regards
From India, Delhi
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Understanding Gratuity and Pension Fund Deductions
Gratuity is an amount that the employer should pay when an employee leaves their establishment after having rendered a service of at least 5 years. It is payable irrespective of service if the employee dies while in service. It is a payment by the employer and not by the employee; therefore, the practice of deducting amounts from the salary of the employee is illegal.
An establishment covered by the Employees Provident Fund will automatically have a Pension Fund contribution by the employer, and that contribution is also a contribution by the employer. The employer cannot recover it from the employee by way of deduction from the salary.
Regards,
Madhu.T.K
From India, Kannur
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Gratuity is an amount that the employer should pay when an employee leaves their establishment after having rendered a service of at least 5 years. It is payable irrespective of service if the employee dies while in service. It is a payment by the employer and not by the employee; therefore, the practice of deducting amounts from the salary of the employee is illegal.
An establishment covered by the Employees Provident Fund will automatically have a Pension Fund contribution by the employer, and that contribution is also a contribution by the employer. The employer cannot recover it from the employee by way of deduction from the salary.
Regards,
Madhu.T.K
From India, Kannur
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Dear Madam/Sir, A simple one worded answer to your questions is a big "NO"...it is illegal,immoral and open theft on the part of employer. The answer by Sr Madhu T.K is absolute. Warm Regards, A
From India, Mumbai
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From India, Mumbai
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Hello Sir, Please tell if an employee dies after 4 years of service than how his gratuity will be calculated, what formula will be applied. Please explain with an example. Regards, Sarita
From India, Mumbai
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From India, Mumbai
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Gratuity Calculation Formula
Very simple, the same formula is Gratuity Qualifying salary (normally Basic + DA) divided by 26 (days) multiplied by 15 (days) further multiplied by 4 (years of service).
In case the gratuity fund is linked to LIC's gratuity scheme, then LIC will pay gratuity based on a calculation projected to a service till his superannuation date.
Regards,
Madhu.T.K
From India, Kannur
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Very simple, the same formula is Gratuity Qualifying salary (normally Basic + DA) divided by 26 (days) multiplied by 15 (days) further multiplied by 4 (years of service).
In case the gratuity fund is linked to LIC's gratuity scheme, then LIC will pay gratuity based on a calculation projected to a service till his superannuation date.
Regards,
Madhu.T.K
From India, Kannur
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Clarification on Gratuity and Pension Deductions
Thank you, Shri Madhu T.K., for your points and clarification regarding the deduction of Gratuity and Pension contributions from employees. Such practices were not commonly heard of earlier. However, nowadays, some Heads of Organizations (who may not be HR personnel) promise Gratuity even before the completion of 5 years to attract candidates. They commit to these promises and then deduct from the salary, ignoring the Gratuity Law. The same situation applies to Pension.
Further, your clarification that the dependent of a deceased employee will receive extra benefits if the gratuity fund is linked to LIC's gratuity scheme is significant. In such cases, LIC will pay gratuity based on a calculation projected to service until the employee's superannuation date, which is valuable information for HR personnel.
Thanks for the contribution, Sir.
Regards,
C. Neyimkhan
21.11.14.
From India, Bangalore
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Thank you, Shri Madhu T.K., for your points and clarification regarding the deduction of Gratuity and Pension contributions from employees. Such practices were not commonly heard of earlier. However, nowadays, some Heads of Organizations (who may not be HR personnel) promise Gratuity even before the completion of 5 years to attract candidates. They commit to these promises and then deduct from the salary, ignoring the Gratuity Law. The same situation applies to Pension.
Further, your clarification that the dependent of a deceased employee will receive extra benefits if the gratuity fund is linked to LIC's gratuity scheme is significant. In such cases, LIC will pay gratuity based on a calculation projected to service until the employee's superannuation date, which is valuable information for HR personnel.
Thanks for the contribution, Sir.
Regards,
C. Neyimkhan
21.11.14.
From India, Bangalore
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SC - Gratuity is in addition to PF & pension 13.3.2013.pdf
PMRPY-DEDUCTION -SOLUTION.xls