Hi, I am working with a small MNC where 60 employees are employed. Some of them have completed five years of service. We have been deducting a monthly contribution from their salary. Now, they are insisting on stopping the deduction and adding it to the monthly gross.
Query Regarding Gratuity Deduction
My query is, as we show gratuity as one of the components of their CTC, if we stop the deduction, is the contribution payable from the company account? Kindly suggest what should be done in this case.
Regards,
Aniket
From India, Pune
Acknowledge(0)
Amend(0)
Query Regarding Gratuity Deduction
My query is, as we show gratuity as one of the components of their CTC, if we stop the deduction, is the contribution payable from the company account? Kindly suggest what should be done in this case.
Regards,
Aniket
From India, Pune
Acknowledge(0)Amend(0)
It depends on the company policies. Normally, gratuity will be part of CTC. Once you include the gratuity part in CTC, you can't remove it from CTC. Advise the employees, even if they have been working for 5 years or more, that it should be deducted from CTC only. Gratuity will be paid only at the time of retirement or when leaving the organization, and it will be calculated based on the number of years of service. It is not limited to just 5 years.
From India, Bangalore
Acknowledge(0)Amend(0)
653From India, Bangalore
Acknowledge(0)Amend(0)
In my opinion, the employees are asking the company to stop deductions from their salary but contribute from their side and add it to the CTC. They are right in the sense that gratuity, in its true sense, is an amount that the organization pays as gratitude to the employee for long service. Many companies deduct it from the employees' salary, whereas it should be paid by the employer and added to the CTC.
I think the employees are right in their stance as, in the current situation, they are being compelled to contribute the amount that is the liability of the employer.
From India, New Delhi
Acknowledge(0)Amend(0)
I think the employees are right in their stance as, in the current situation, they are being compelled to contribute the amount that is the liability of the employer.
From India, New Delhi
Acknowledge(0)Amend(0)
Dear Aniket,
If the policy of your company's CTC states that gratuity is to be part of it, then it has nothing to do with the completion of five years of employees' tenure. It still remains a part of CTC. If, at this moment, based on their request, you tend to change it, please keep in mind that it has to be a general change, and all other employees about to complete five years in the company should also get the benefit. Otherwise, it may lead to grievances.
The best thing would be to explain to all employees that gratuity as a part of CTC has nothing to do with five years. The company is still liable to pay gratuity for "N" number of years they work. I didn't understand the concept of adding gratuity to the gross salary. If it means adding the same amount of contribution under some other head in the gross salary, they are pointing towards an increment. In such a case, ideally, you should not do so and introduce a commitment bonus, the amount of which can be decided by your management (e.g., Rs. 1000 * number of service years completed above five years. The amount can vary depending on the grade of the employee). This will motivate them and also give them the feeling of being recognized in the company.
Secondly, as Ms. Avika said, if the company is liable to pay to show gratitude and it should not be considered as part of CTC, then it must be from day one. Gratitude doesn't come in only after five years. This would further demotivate your employees who have not completed five years.
Please look into several other factors before bringing in the amendment. You must also understand that the management should be ready to accept this huge liability.
Regards,
Hiral
From India, Ahmedabad
Acknowledge(0)Amend(0)
If the policy of your company's CTC states that gratuity is to be part of it, then it has nothing to do with the completion of five years of employees' tenure. It still remains a part of CTC. If, at this moment, based on their request, you tend to change it, please keep in mind that it has to be a general change, and all other employees about to complete five years in the company should also get the benefit. Otherwise, it may lead to grievances.
The best thing would be to explain to all employees that gratuity as a part of CTC has nothing to do with five years. The company is still liable to pay gratuity for "N" number of years they work. I didn't understand the concept of adding gratuity to the gross salary. If it means adding the same amount of contribution under some other head in the gross salary, they are pointing towards an increment. In such a case, ideally, you should not do so and introduce a commitment bonus, the amount of which can be decided by your management (e.g., Rs. 1000 * number of service years completed above five years. The amount can vary depending on the grade of the employee). This will motivate them and also give them the feeling of being recognized in the company.
Secondly, as Ms. Avika said, if the company is liable to pay to show gratitude and it should not be considered as part of CTC, then it must be from day one. Gratitude doesn't come in only after five years. This would further demotivate your employees who have not completed five years.
Please look into several other factors before bringing in the amendment. You must also understand that the management should be ready to accept this huge liability.
Regards,
Hiral
From India, Ahmedabad
Acknowledge(0)Amend(0)
Gratuity as Part of CTC: A Misstep
Showing gratuity as part of CTC is not a proper practice. This should be accrued separately for MIS to the management. By incorporating it in CTC, you have made it appear larger than the actual amount. For an employee, what they receive in hand is more relevant than what they can expect after five years. Please make changes as requested by employees, or you may lose talent over such a minor issue.
Regards,
Murali
From India, Chennai
Acknowledge(0)Amend(0)
Showing gratuity as part of CTC is not a proper practice. This should be accrued separately for MIS to the management. By incorporating it in CTC, you have made it appear larger than the actual amount. For an employee, what they receive in hand is more relevant than what they can expect after five years. Please make changes as requested by employees, or you may lose talent over such a minor issue.
Regards,
Murali
From India, Chennai
Acknowledge(0)Amend(0)
The deduction of gratuity contributions from the salary is illegal. Gratuity is a one-time payment by the employer upon resignation, superannuation, or termination. Therefore, employees do not have to contribute to it. However, since it has already been deducted, you can show a good gesture by adding it to the full and final payment, refunding any additional amounts taken from the employees.
Thank you.
From India, Pune
Acknowledge(2)Amend(0)
Thank you.
From India, Pune
Acknowledge(2)Amend(0)
Gratuity Deduction from Salary
Deduction of gratuity from salary is not correct. You can show it in CTC for costing or MIS purposes. If gratuity is paid from the amount deducted from employees, then where is the employer discharging his legal obligation?
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
Acknowledge(1)Amend(0)
Deduction of gratuity from salary is not correct. You can show it in CTC for costing or MIS purposes. If gratuity is paid from the amount deducted from employees, then where is the employer discharging his legal obligation?
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
Acknowledge(1)Amend(0)
Deduction of Gratuity from Employee Salary is Unlawful
Gratuity is an amount paid by the employer to the employee when he/she retires or leaves the organization. Moreover, it is the right of the employee to receive gratuity when he/she completes 4.6 years of continuous service. Convince the management of this.
Regards,
Hareesh
From India, Kochi
Acknowledge(0)Amend(0)
Gratuity is an amount paid by the employer to the employee when he/she retires or leaves the organization. Moreover, it is the right of the employee to receive gratuity when he/she completes 4.6 years of continuous service. Convince the management of this.
Regards,
Hareesh
From India, Kochi
Acknowledge(0)Amend(0)
I need clarification: what do you mean by deducting the amount of Gratuity from salary? If it means that the amount of gratuity is being deducted from the normal salary payable on a monthly basis, then the deduction is entirely illegal. You should not only stop the practice of deducting it from salary but also refund the amount deducted until now to the employees.
If the deduction from the salary is on account of Gratuity being part of CTC and not an actual deduction, then you will have to explain to the employees the concept of CTC, Gross Salary, and Take-home salary. Convince them that the practice adopted by you is in line with the practices adopted by many organizations.
Thank you.
From India, Mumbai
Acknowledge(0)Amend(0)
If the deduction from the salary is on account of Gratuity being part of CTC and not an actual deduction, then you will have to explain to the employees the concept of CTC, Gross Salary, and Take-home salary. Convince them that the practice adopted by you is in line with the practices adopted by many organizations.
Thank you.
From India, Mumbai
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.
Employee Benefits.doc
SBT Vs Asst. Labour Commissioner- Gratuity dismissed employee-LTS.PD F