I am new to this site and got so many positive points in this regard that this site is especially for HR Buddies and really helpful. I also have one query related to the Gratuity concept. Therefore, I want to get the correct resolution on Gratuity if it should be a part of CTC or not because I have seen so many MNC companies deducting gratuity on a monthly basis, which I really think is not a legal practice or at par with the Payment of Gratuity Act, 1972. It is a kind of benefit that the company provides to their employees after 5 years of their contributory services to that organization or post-retirement, permanent disablement due to an accident. Therefore, I believe there is no point in deducting it from the employee's salary monthly.
Kindly resolve this query by giving your valuable inputs on the same.
From India, Delhi
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1Kindly resolve this query by giving your valuable inputs on the same.
From India, Delhi
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Dear Anu,
The concept of CTC has emerged recently, and now companies are including the cost of two teas provided to you during working hours. Basically, there is no law that defines CTC. I personally oppose the concept of gratuity being included in CTC. If someone resigns after two years, then what is the use of that gratuity?
Thanks,
J. S. Malik
From India, Delhi
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The concept of CTC has emerged recently, and now companies are including the cost of two teas provided to you during working hours. Basically, there is no law that defines CTC. I personally oppose the concept of gratuity being included in CTC. If someone resigns after two years, then what is the use of that gratuity?
Thanks,
J. S. Malik
From India, Delhi
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Dear Anu,
CTC stands for Cost to Company and denotes the total cost incurred by the company for employing a person. Since Gratuity is a fixed contribution from the company's side, it is shown as a component of CTC.
Swati
From India, Bangalore
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CTC stands for Cost to Company and denotes the total cost incurred by the company for employing a person. Since Gratuity is a fixed contribution from the company's side, it is shown as a component of CTC.
Swati
From India, Bangalore
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Dear Swati,
How is gratuity fixed in contribution? It varies as the basic salary varies. I would like to ask, what will happen if someone leaves after two years? Will you pay gratuity to them? If you pay them, then it is not gratuity because gratuity is typically paid after five years of service. If you do not pay them, then what is the use of including this amount in the CTC head?
J.S. Malik
From India, Delhi
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How is gratuity fixed in contribution? It varies as the basic salary varies. I would like to ask, what will happen if someone leaves after two years? Will you pay gratuity to them? If you pay them, then it is not gratuity because gratuity is typically paid after five years of service. If you do not pay them, then what is the use of including this amount in the CTC head?
J.S. Malik
From India, Delhi
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Dear Ms. Swati/Mr. Malik,
Thank you for your prompt response. I have discussed with my seniors in the company about excluding gratuity from CTC. Including gratuity as a part of CTC leads to confusion, such as:
- What happens to the amount deducted from an employee's monthly salary if they resign before completing 5 years? Will the employee receive the amount that was supposed to be part of the CTC?
- What will occur with the funds contributed to LIC (or any other Group Gratuity Scheme) if an employee leaves before 5 years? Will the agency pay the company or the employee?
- The CTC concept is based on an annual calculation. Are we paying gratuity yearly or monthly? If it is paid annually or monthly, why can't that amount be claimed?
I have also sent them links and an article to clarify this doubt, but they mentioned that this is an HR practice and cannot be altered. I believe this is not just an HR practice but a legal practice under the Gratuity Act, 1972. Failure to comply could be a punishable offense. Am I correct in my understanding? Is there anything I can do in this matter?
I look forward to your response. Your assistance would be greatly appreciated.
Thank you and regards,
Anu
From India, Delhi
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Thank you for your prompt response. I have discussed with my seniors in the company about excluding gratuity from CTC. Including gratuity as a part of CTC leads to confusion, such as:
- What happens to the amount deducted from an employee's monthly salary if they resign before completing 5 years? Will the employee receive the amount that was supposed to be part of the CTC?
- What will occur with the funds contributed to LIC (or any other Group Gratuity Scheme) if an employee leaves before 5 years? Will the agency pay the company or the employee?
- The CTC concept is based on an annual calculation. Are we paying gratuity yearly or monthly? If it is paid annually or monthly, why can't that amount be claimed?
I have also sent them links and an article to clarify this doubt, but they mentioned that this is an HR practice and cannot be altered. I believe this is not just an HR practice but a legal practice under the Gratuity Act, 1972. Failure to comply could be a punishable offense. Am I correct in my understanding? Is there anything I can do in this matter?
I look forward to your response. Your assistance would be greatly appreciated.
Thank you and regards,
Anu
From India, Delhi
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Companies work on the concept of CTC, but in the appointment letter, the gross salary (basic + all allowances) is shown, and reimbursements along with other statutory provisions reserved for the employee are mentioned as an annexure if disclosed on paper. This concept of CTC is for accounting and HR budgeting purposes. This is also to make employees realize that the company is spending/making provisions for this amount when they hire any employee. You can say the company is showing transparency in complying with statutory costs.
From India, Delhi
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From India, Delhi
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Dear
Our company is mentioning the gratuity component on papers as well. Gratuity is something that cannot be withdrawn before 5 years, so where is the point of deducting it since the joining of an employee? My query is if I can do anything in this case. I think the company is making a fool of their employees by doing so. It is totally illegitimate.
Please suggest to me if I can do anything in this.
Thanks & Regards
Anu
From India, Delhi
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Our company is mentioning the gratuity component on papers as well. Gratuity is something that cannot be withdrawn before 5 years, so where is the point of deducting it since the joining of an employee? My query is if I can do anything in this case. I think the company is making a fool of their employees by doing so. It is totally illegitimate.
Please suggest to me if I can do anything in this.
Thanks & Regards
Anu
From India, Delhi
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Dear Anu,
Ethically, it is wrong to include Gratuity as a part of CTC. Gratuity should be seen as one of the retention factors, though nobody cares!
However, it will make more sense to make it a part of someone's CTC once he/she completes 5 years of service because then it will actually become payable.
To address your doubts:
1. The employee in question will lose this amount.
2. LIC should refund or adjust such amount in the next payable premium to them. For this, the employer has to make a request, or it should have been a part of the agreement between LIC and the Company.
3. Gratuity can only be paid in one go, not in installments.
4. What can you do? Hmm... nothing much if your management is adamant. So when you can't change them, change yourself. At the time of salary negotiation, ask the candidate about their CTC including Gratuity amount and then offer a package including the gratuity amount that you would 'pay'. This will nullify the impact, and you will be contented that the person you are hiring is not cheated.
Good luck.
Prashant
From India, Delhi
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Ethically, it is wrong to include Gratuity as a part of CTC. Gratuity should be seen as one of the retention factors, though nobody cares!
However, it will make more sense to make it a part of someone's CTC once he/she completes 5 years of service because then it will actually become payable.
To address your doubts:
1. The employee in question will lose this amount.
2. LIC should refund or adjust such amount in the next payable premium to them. For this, the employer has to make a request, or it should have been a part of the agreement between LIC and the Company.
3. Gratuity can only be paid in one go, not in installments.
4. What can you do? Hmm... nothing much if your management is adamant. So when you can't change them, change yourself. At the time of salary negotiation, ask the candidate about their CTC including Gratuity amount and then offer a package including the gratuity amount that you would 'pay'. This will nullify the impact, and you will be contented that the person you are hiring is not cheated.
Good luck.
Prashant
From India, Delhi
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Dear Anu,
Generally, companies are adding Gratuity Amount to the components of Annual CTC. The calculation of the yearly gratuity amount is also different based on various concepts.
In my view, as gratuity is payable after the completion of five years, the Gratuity premium paid to LIC on account of the Employee may be shown as an Annual CTC component. But it can't be part of the gross salary. It depends upon the employer to add CTC components if any expense is being done on account of it.
Employers can't deduct the gratuity amount from an Employee's salary. It is an unauthorized deduction. An Employee can claim it under the Payment of Wages Act by a simple application to the competent authority of the Labour Dept.
Regards,
From India, Lucknow
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Generally, companies are adding Gratuity Amount to the components of Annual CTC. The calculation of the yearly gratuity amount is also different based on various concepts.
In my view, as gratuity is payable after the completion of five years, the Gratuity premium paid to LIC on account of the Employee may be shown as an Annual CTC component. But it can't be part of the gross salary. It depends upon the employer to add CTC components if any expense is being done on account of it.
Employers can't deduct the gratuity amount from an Employee's salary. It is an unauthorized deduction. An Employee can claim it under the Payment of Wages Act by a simple application to the competent authority of the Labour Dept.
Regards,
From India, Lucknow
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(Fact Checked)-[B]Response[/B]: The Payment of Gratuity Act, 1972 mandates that gratuity is a statutory benefit payable by the employer and cannot be deducted from an employee's salary. It should be part of CTC but not gross salary. Showing the premium paid to LIC as part of CTC is acceptable. Employee can claim unauthorized deductions under the Payment of Wages Act. (1 Acknowledge point)
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Dear Anuj,
Most companies do not include gratuity in CTC. Only in the last 7-8 years has this concept of CTC come up. See, whatever premium we are paying to LIC is actually not a premium and should not cost the employee. It is a fund created by the company, and LIC pays interest on it to the company. Whatever fund you use in the form of payment of gratuity to employees is debited from this fund, and the rest is balanced in the company account.
Thank you,
J.S. Malik
From India, Delhi
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Most companies do not include gratuity in CTC. Only in the last 7-8 years has this concept of CTC come up. See, whatever premium we are paying to LIC is actually not a premium and should not cost the employee. It is a fund created by the company, and LIC pays interest on it to the company. Whatever fund you use in the form of payment of gratuity to employees is debited from this fund, and the rest is balanced in the company account.
Thank you,
J.S. Malik
From India, Delhi
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Hi Friends,
Actually, there is no law regarding showing gratuity in CTC. However, many companies choose to include it in CTC because if employees stay with the company for more than five years, the company will be liable to pay the gratuity. In my opinion, this practice is appropriate.
Govind
From India, Mumbai
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Actually, there is no law regarding showing gratuity in CTC. However, many companies choose to include it in CTC because if employees stay with the company for more than five years, the company will be liable to pay the gratuity. In my opinion, this practice is appropriate.
Govind
From India, Mumbai
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Dear Anu,
One thing to keep in mind is that gratuity is a statutory right of an employee who has completed 5 years in the same organization. It is the employer's liability to provide this benefit to the employee without including it in the CTC. You can't say gratuity is a part of CTC. Just as with the amendment of a factory license, you have to pay a certain fee to the government, the CTC is also a legal requirement for each organization.
You can find more information on our website: :: Global Overseas - Home :: Compliance Audit, ISO certification, BFSI Audit, Export, Gem, Jewelry, Chemical Industry.
From India, Delhi
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One thing to keep in mind is that gratuity is a statutory right of an employee who has completed 5 years in the same organization. It is the employer's liability to provide this benefit to the employee without including it in the CTC. You can't say gratuity is a part of CTC. Just as with the amendment of a factory license, you have to pay a certain fee to the government, the CTC is also a legal requirement for each organization.
You can find more information on our website: :: Global Overseas - Home :: Compliance Audit, ISO certification, BFSI Audit, Export, Gem, Jewelry, Chemical Industry.
From India, Delhi
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Dear All,
Earlier, there were many discussions and postings on gratuity being a part of CTC or not. In this regard, I had also shared my views that gratuity should not be included in CTC. HR professionals in respective companies should advise management against including gratuity in CTC. The point is clear: CTC stands for cost to company, and all costs incurred towards an employee should be included, but it should be payable to the employee. If an employee leaves the company before five years, it should not be payable and should not be considered part of CTC. 😉
Regards,
M Srinivas
Asst Manager - HR
Hyderabad Waste Management Project
Ramky Group of Companies
Hyderabad
9866005600
msrinivashr@rediffmail.com
From India, Hyderabad
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Earlier, there were many discussions and postings on gratuity being a part of CTC or not. In this regard, I had also shared my views that gratuity should not be included in CTC. HR professionals in respective companies should advise management against including gratuity in CTC. The point is clear: CTC stands for cost to company, and all costs incurred towards an employee should be included, but it should be payable to the employee. If an employee leaves the company before five years, it should not be payable and should not be considered part of CTC. 😉
Regards,
M Srinivas
Asst Manager - HR
Hyderabad Waste Management Project
Ramky Group of Companies
Hyderabad
9866005600
msrinivashr@rediffmail.com
From India, Hyderabad
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Dear Anu,
Gratuity is not an assured payment (before 5 years); it is a provision made by the company in the books. It is a statutory contribution. The company may choose to add any benefit under CTC. However, as HR professionals, it is our duty to explain this to the candidate or employee.
These are my two cents.
Regards,
Sachin Khadilkar
From India, Mumbai
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Gratuity is not an assured payment (before 5 years); it is a provision made by the company in the books. It is a statutory contribution. The company may choose to add any benefit under CTC. However, as HR professionals, it is our duty to explain this to the candidate or employee.
These are my two cents.
Regards,
Sachin Khadilkar
From India, Mumbai
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Hi Anu,
I have gone through the whole discussion and found it interesting. You are very right that gratuity is not a part of CTC, but nowadays, MNCs are including it as a part of CTC and deducting their contribution on a monthly basis. In some companies, they make the payment in the F&F if an employee is leaving in less than 5 years. On top of that, companies are also giving them a tax rebate.
I would like to share a fact that an employee receives a greater amount on maturity (after 5 years) compared to their monthly contribution. If you add up the monthly amounts, you will notice the difference because the company has to pay as per the gratuity formula.
Thanks,
John
From India, Delhi
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I have gone through the whole discussion and found it interesting. You are very right that gratuity is not a part of CTC, but nowadays, MNCs are including it as a part of CTC and deducting their contribution on a monthly basis. In some companies, they make the payment in the F&F if an employee is leaving in less than 5 years. On top of that, companies are also giving them a tax rebate.
I would like to share a fact that an employee receives a greater amount on maturity (after 5 years) compared to their monthly contribution. If you add up the monthly amounts, you will notice the difference because the company has to pay as per the gratuity formula.
Thanks,
John
From India, Delhi
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Hi Anu,
One more point is that by doing this, the company has very little liability because they are already deducting contributions from employees, making adjustments in the books, and essentially it's a single payment, not a double.
Thanks,
John
From India, Delhi
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One more point is that by doing this, the company has very little liability because they are already deducting contributions from employees, making adjustments in the books, and essentially it's a single payment, not a double.
Thanks,
John
From India, Delhi
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My understanding is that Gratuity is taken into consideration when calculating the CTC of an employee. At the time of resignation: Prior to 5 years, we pay back all amounts deducted from the CTC of the employee as Gratuity (considering the same as taxable) with the final settlement of the account. After 5 years, if an employee resigns, calculate the gratuity as provided by the formula and pay.
From India, Mumbai
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From India, Mumbai
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Hey Anu, don't deviate in a number of advices; it may make you confused. I have read the Employee Gratuity Act of India, and it is paid to employees for their loyalty to the company if the person has worked for 5 years or more. Two years back, the maximum amount of Gratuity was not more than 3 lakhs. Does the calculation exceed that amount? Follow the advice of Mr. Malik; he is guiding you correctly.
From India, Delhi
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From India, Delhi
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Hi All,
Greetings for the day,
I am new to this site. I have one query related to HR Shared Services. What is HR Shared Services? 🤔 Please give your valuable suggestions and solve my query.
Thanks & Regards,
M. Uma
From India, Madras
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Greetings for the day,
I am new to this site. I have one query related to HR Shared Services. What is HR Shared Services? 🤔 Please give your valuable suggestions and solve my query.
Thanks & Regards,
M. Uma
From India, Madras
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So folks! I don't know about Anu, but I have become more confused.
Fact:
CTC is the cost to the company. Each company has its way of arriving at a CTC. Some companies add benefits, incentives, extra allowances, even the value of transportation as a part of TCTC (Total Cost To Company). This is done to enhance the look of CTC to attract employees.
"CTC is different from gross salary. Salary is what you get in hand, and CTC is a bargaining tool for both the employee and the employer - Is it not correct?"
Doubt 1:
Gratuity is something that needs to be paid by the company to the employee eventually, after 5 years. Agreed. How is it unethical then to put it in cost to the company? After all, it is a cost to the company. I mean as long as the 'pay break-up statement' very clearly states that gratuity would not be deducted from the promised gross amount; Is it not all right?
Doubt 2:
Then the PF value, which is the employer's contribution, should have the same treatment on papers, right? Then why do many companies include the Company's contribution of PF in their offer letters?
Anu, I am sorry if I am confusing the matter further.
Could anybody please provide some literature on this?
Regards,
Kavitha
From India, Bangalore
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Fact:
CTC is the cost to the company. Each company has its way of arriving at a CTC. Some companies add benefits, incentives, extra allowances, even the value of transportation as a part of TCTC (Total Cost To Company). This is done to enhance the look of CTC to attract employees.
"CTC is different from gross salary. Salary is what you get in hand, and CTC is a bargaining tool for both the employee and the employer - Is it not correct?"
Doubt 1:
Gratuity is something that needs to be paid by the company to the employee eventually, after 5 years. Agreed. How is it unethical then to put it in cost to the company? After all, it is a cost to the company. I mean as long as the 'pay break-up statement' very clearly states that gratuity would not be deducted from the promised gross amount; Is it not all right?
Doubt 2:
Then the PF value, which is the employer's contribution, should have the same treatment on papers, right? Then why do many companies include the Company's contribution of PF in their offer letters?
Anu, I am sorry if I am confusing the matter further.
Could anybody please provide some literature on this?
Regards,
Kavitha
From India, Bangalore
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Dear Anu,
Gratuity is considered as a part of CTC because every company has yearly budgeting and planning. They account for all expenses incurred for each employee. Any surplus in budgeting is considered as savings. If anyone resigns before 5 years, that amount goes into the Management Account, and if an employee is eligible for gratuity, it goes into the Employee Account. Employers include all these components in CTC to increase the total amount so that employees are attracted to and accept job offers. It is clear why employers always consider gratuity in CTC.
I hope this clears up any confusion. Let me know if you need any further clarification.
From India, Lucknow
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Gratuity is considered as a part of CTC because every company has yearly budgeting and planning. They account for all expenses incurred for each employee. Any surplus in budgeting is considered as savings. If anyone resigns before 5 years, that amount goes into the Management Account, and if an employee is eligible for gratuity, it goes into the Employee Account. Employers include all these components in CTC to increase the total amount so that employees are attracted to and accept job offers. It is clear why employers always consider gratuity in CTC.
I hope this clears up any confusion. Let me know if you need any further clarification.
From India, Lucknow
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Dear All,
CTC indicates the cost to be incurred by the company in engaging an employee, and it does not indicate the gross salary to be received by the employee. Many indirect benefits are also converted into rupee terms for calculating CTC. Hence, Gratuity should also be part of CTC. Whether the employee stays for 5 years or not, the company deposits the amount against gratuity, i.e., the organization incurs that cost irrespective of the employee's tenure. Therefore, it is considered as a part of CTC but not a part of the Gross salary. So, if you are not following the concept of CTC, then do not worry.
In the CTC concept, the canteen subsidy is also a part of CTC whether the employee takes food in the canteen or not. The same applies to the mediclaim premium. The organization includes the premium as a part of CTC whether the employee falls sick or not.
I hope the points are clear.
Regards,
Jaganath
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CTC indicates the cost to be incurred by the company in engaging an employee, and it does not indicate the gross salary to be received by the employee. Many indirect benefits are also converted into rupee terms for calculating CTC. Hence, Gratuity should also be part of CTC. Whether the employee stays for 5 years or not, the company deposits the amount against gratuity, i.e., the organization incurs that cost irrespective of the employee's tenure. Therefore, it is considered as a part of CTC but not a part of the Gross salary. So, if you are not following the concept of CTC, then do not worry.
In the CTC concept, the canteen subsidy is also a part of CTC whether the employee takes food in the canteen or not. The same applies to the mediclaim premium. The organization includes the premium as a part of CTC whether the employee falls sick or not.
I hope the points are clear.
Regards,
Jaganath
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Dear Anu,
The term CTC used by HR Executives does not have any legal sanctity or sanction. It is one of the corporate clichés to bait young talents by inflating the pay figures as a package, incorporating all kinds of retirement benefits and allowances as salary.
As you have rightly pointed out, Gratuity, being a statutory payment under the Gratuity Act, 1972, is a statutory obligation of the employer to make payments as per the provisions of the Act, without collecting any contribution from the employee. In the case of collecting any contribution from the employer, it is illegal, and I am willing to take up the case on behalf of the employee.
The LIC Group Gratuity Scheme is designed to reduce the burden of the employer by pooling the risk. Employees who have not completed five years of continuous service do not have any claim over the employer regarding the contributions made by the employer, as it operates on the principle of insurance.
I appreciate the persistence of Anu and the legal acumen.
A. Irudayam
Advocate
From India, Madras
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The term CTC used by HR Executives does not have any legal sanctity or sanction. It is one of the corporate clichés to bait young talents by inflating the pay figures as a package, incorporating all kinds of retirement benefits and allowances as salary.
As you have rightly pointed out, Gratuity, being a statutory payment under the Gratuity Act, 1972, is a statutory obligation of the employer to make payments as per the provisions of the Act, without collecting any contribution from the employee. In the case of collecting any contribution from the employer, it is illegal, and I am willing to take up the case on behalf of the employee.
The LIC Group Gratuity Scheme is designed to reduce the burden of the employer by pooling the risk. Employees who have not completed five years of continuous service do not have any claim over the employer regarding the contributions made by the employer, as it operates on the principle of insurance.
I appreciate the persistence of Anu and the legal acumen.
A. Irudayam
Advocate
From India, Madras
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Dear Mr. Irudayam,
I am in a Telecom company, as an Assistant Manager in Retail Sales. My employer is also practicing the same thing, i.e., they are illegally deducting my Gratuity amount from my monthly salary. According to my CTC, Gratuity should be 3640, but they are deducting 336 Rs per month from my annual payout. Will you please help me resolve this ongoing paradox? I am ready to consult with you professionally following all norms!
If possible, please reply to my email: ani23_m@yahoo.co.in.
Thanks,
Anthony
From India, Calcutta
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I am in a Telecom company, as an Assistant Manager in Retail Sales. My employer is also practicing the same thing, i.e., they are illegally deducting my Gratuity amount from my monthly salary. According to my CTC, Gratuity should be 3640, but they are deducting 336 Rs per month from my annual payout. Will you please help me resolve this ongoing paradox? I am ready to consult with you professionally following all norms!
If possible, please reply to my email: ani23_m@yahoo.co.in.
Thanks,
Anthony
From India, Calcutta
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Hi Malik Ji,
Your response is neat, but my question is, since the gratuity is also a statutory benefit, if CTC forms part of CTC, then is it still possible to drag the employer to court, citing the reason that they are cheating the employees who have not rendered 5 years of service? Your views will be more useful.
Thanks.
From India, Madras
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Your response is neat, but my question is, since the gratuity is also a statutory benefit, if CTC forms part of CTC, then is it still possible to drag the employer to court, citing the reason that they are cheating the employees who have not rendered 5 years of service? Your views will be more useful.
Thanks.
From India, Madras
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Is it fair if a company rolls out a CTC offer with the Gratuity component included as a part of the package and upon joining revokes this Gratuity amount and lowers the CTC amount by taking out this component?
If I have accepted the offer along with the gratuity amount included, shouldn't I be compensated with this gratuity amount component under other heads as the company has revoked the gratuity clause after the acceptance of my offer?
Kindly suggest ways to negotiate with my employer.
Cheers
From India, Mumbai
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If I have accepted the offer along with the gratuity amount included, shouldn't I be compensated with this gratuity amount component under other heads as the company has revoked the gratuity clause after the acceptance of my offer?
Kindly suggest ways to negotiate with my employer.
Cheers
From India, Mumbai
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(Fact Checked)-The company cannot revoke gratuity once included in CTC offer. If offered and accepted, it must be honored. Negotiate respectfully based on this fact. (1 Acknowledge point)
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The simple answer of this question is, put the gratuity fund aside and invests through multiple investment plan. Don't go by LIC and other Gratuity fund scheme. This way you can always pay the amount been deducted from the salaries to the outgoing employees under Ex-Gratia or an incentive form. Yes the CTC is very common term is in existence now days.
Poonam
From India, Delhi
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Poonam
From India, Delhi
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Dear All,
Gratuity eligibility is after 5 years of continuous service. However, the fact is that many good BIG organizations are deducting Gratuity and even superannuation as a component in the CTC from an employee.
I have recently interviewed people for the GM post and found that almost 45% of candidates had gratuity as a part of their CTC, including candidates from HCL Tech. Normally, the deduction made is 4.5% of the Basic salary.
I myself couldn't understand the logic behind this because if you are deducting a specific percentage from the salary, then how can an employer calculate the gratuity amount with respect to the gratuity formula after an employee serves an organization for 5 years.
The question also arises: what happens if an employee leaves before 5 years?
I request those members who are already following this practice in their company to clarify this doubt.
ANU: Would you please ask the same question to your seniors? Do they pay the deducted amount to employees if he/she leaves before completing 5 years, and is the contribution made by both the employee and employer or is it one-sided?
Warm Regards, Sumiksha Suri
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Gratuity eligibility is after 5 years of continuous service. However, the fact is that many good BIG organizations are deducting Gratuity and even superannuation as a component in the CTC from an employee.
I have recently interviewed people for the GM post and found that almost 45% of candidates had gratuity as a part of their CTC, including candidates from HCL Tech. Normally, the deduction made is 4.5% of the Basic salary.
I myself couldn't understand the logic behind this because if you are deducting a specific percentage from the salary, then how can an employer calculate the gratuity amount with respect to the gratuity formula after an employee serves an organization for 5 years.
The question also arises: what happens if an employee leaves before 5 years?
I request those members who are already following this practice in their company to clarify this doubt.
ANU: Would you please ask the same question to your seniors? Do they pay the deducted amount to employees if he/she leaves before completing 5 years, and is the contribution made by both the employee and employer or is it one-sided?
Warm Regards, Sumiksha Suri
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Dear Sumiksha,
Greetings for the day ahead!!!!
I agree with you that many big companies show gratuity, superannuation, employers' contribution to PF, etc., as part of the CTC. However, I disagree with this being a wrong practice.
Recruitment is a growth activity for the companies. When you recruit an employee, you expect her/him to stay in the organization and become instrumental in the development of the company. This concept, however, has gone for a toss, thanks to the neo-capitalistic rule of "free movement of labours." At the same time, recruitment is also a cost center. How do you expect companies to make up for the costs incurred (keeping again in mind the neo-capitalistic rule of companies being a purely profit-making body)?
All the overheads, including gratuity, can be enjoyed if you stay in the company for a definite period of time. However, employees leave in search of better opportunities and pay hikes. The practice of including such overheads in the CTC disincentivizes the early exit of employees on the one hand and is an incentive for those who stay with the company on the other hand.
Regards,
Team GroupHR
From India, Delhi
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Greetings for the day ahead!!!!
I agree with you that many big companies show gratuity, superannuation, employers' contribution to PF, etc., as part of the CTC. However, I disagree with this being a wrong practice.
Recruitment is a growth activity for the companies. When you recruit an employee, you expect her/him to stay in the organization and become instrumental in the development of the company. This concept, however, has gone for a toss, thanks to the neo-capitalistic rule of "free movement of labours." At the same time, recruitment is also a cost center. How do you expect companies to make up for the costs incurred (keeping again in mind the neo-capitalistic rule of companies being a purely profit-making body)?
All the overheads, including gratuity, can be enjoyed if you stay in the company for a definite period of time. However, employees leave in search of better opportunities and pay hikes. The practice of including such overheads in the CTC disincentivizes the early exit of employees on the one hand and is an incentive for those who stay with the company on the other hand.
Regards,
Team GroupHR
From India, Delhi
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But Dear Team GroupHR, it is our own money. If the employee negotiates on CTC, then in that case, it is a loss for him. The employee does not charge the company for bearing the brunt of clients on behalf of the company, dealing with shouting from managers, and many other problems which will take time to be listed.
Personally, I feel it is just unethical to retain gratuity if the employee does not complete five years in the company.
From India, Mumbai
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Personally, I feel it is just unethical to retain gratuity if the employee does not complete five years in the company.
From India, Mumbai
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Please find attached reference check formats. As per the rule, there should be professional reference checks (one current employer and the other previous employer) and two should be social references. I am hereby attaching the reference check format, hoping it will be very useful for all HR professionals.
Regards,
Sanjay Pandey
GM - HR and Admin
Billets Elektro Werke Ltd.
Gujarat
From India, Vapi
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Regards,
Sanjay Pandey
GM - HR and Admin
Billets Elektro Werke Ltd.
Gujarat
From India, Vapi
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc
CiteHR.AI
(Fact Checked)-The mention of gratuity as a component in the CTC is a common practice, but deduction before 5 years is not aligned with the Gratuity Act, 1972. You can address this concern with HR for clarification. (1 Acknowledge point)