Hi, I am working as an HR in an IT company. We deduct gratuity from employee CTC. Should we mention gratuity in the appointment letter or not? If I mention it, does it have to include any clause with fine print for the minimum term of service?
From India, Gurgaon
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From India, Gurgaon
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Gratuity Entitlement in Appointment Letters
You should mention 'gratuity' entitlement in the appointment letter, whether you follow the CTC pattern or the conventional pattern.
Minimum Service Requirement for Gratuity
With respect to the minimum service required to be eligible for gratuity, it depends on your policy. This could be whether your firm follows the Payment of Gratuity Act or a similar one offered through other agencies like LIC, etc. Under the PG Act, 5 years of 'continuous service' (4 years + 240 days in the 5th year) is the criterion. However, if the service condition applicable is 'Fixed Term Employment' for a duration of less than 5 years, then gratuity is payable even if the qualifying service is less than 5 years.
Gratuity Deduction and CTC
Regarding 'deduction' towards gratuity, unless you really pay CTC, there is no question of deduction arising. CTC, as I understand, comprises two parts. The first part consists of a sum that includes basic, DA, HRA, other allowances, and bonus, which are parts of the monthly payable. The second part consists of components not payable monthly to employees, such as EPF contribution, leave salary, gratuity, etc., which are payable not monthly but as and when due.
From India, Bangalore
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1159You should mention 'gratuity' entitlement in the appointment letter, whether you follow the CTC pattern or the conventional pattern.
Minimum Service Requirement for Gratuity
With respect to the minimum service required to be eligible for gratuity, it depends on your policy. This could be whether your firm follows the Payment of Gratuity Act or a similar one offered through other agencies like LIC, etc. Under the PG Act, 5 years of 'continuous service' (4 years + 240 days in the 5th year) is the criterion. However, if the service condition applicable is 'Fixed Term Employment' for a duration of less than 5 years, then gratuity is payable even if the qualifying service is less than 5 years.
Gratuity Deduction and CTC
Regarding 'deduction' towards gratuity, unless you really pay CTC, there is no question of deduction arising. CTC, as I understand, comprises two parts. The first part consists of a sum that includes basic, DA, HRA, other allowances, and bonus, which are parts of the monthly payable. The second part consists of components not payable monthly to employees, such as EPF contribution, leave salary, gratuity, etc., which are payable not monthly but as and when due.
From India, Bangalore
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Appointment Letter.docx