My date of birth is 31 Jan 1963. I joined a Manufacturing Co on 01 Sep 2016. The Co is deducting my Gratuity at 4.81% of my Basic Salary as per Co Policy, and it is part of my C.T.C. The age of superannuation in the Co is 58 years.
Assuming that even if I desire to continue in the Co until 58 years, I would retire on 31 Jan 2021. From 01 Sep 2016 to 31 Jan 2021, I would have only served for 4 years and 5 months.
What will happen to my Gratuity Payment in my case? Will I be eligible and given it, or will I not be eligible and hence not be given it? If not, what should I do?
From India, New Delhi
Acknowledge(0)
Amend(0)
Assuming that even if I desire to continue in the Co until 58 years, I would retire on 31 Jan 2021. From 01 Sep 2016 to 31 Jan 2021, I would have only served for 4 years and 5 months.
What will happen to my Gratuity Payment in my case? Will I be eligible and given it, or will I not be eligible and hence not be given it? If not, what should I do?
From India, New Delhi
Acknowledge(0)Amend(0)
Understanding Gratuity Eligibility and Calculation
Your gratuity increases with the increase in the service period. However, to be eligible for gratuity, you must complete 5 years of service (which is more than 4 years and 6 months).
For the gratuity calculation, the years of service are rounded off to the nearest whole number. This means that if you have completed 7 years and 7 months of service, the length of service considered for gratuity calculation would be 8 years. Similarly, if you have completed 9 years and 5 months, the duration for gratuity calculation would be 9 years.
According to the law, for gratuity calculation, your salary will include only the following components:
- Basic Salary
- Dearness Allowance (if any)
This implies that House Rent Allowance (HRA), bonus, special allowance, and reimbursements are not considered in the gratuity calculation. This explains why private sector employers often aim to keep the basic salary low.
Regards
From India, Surat
Acknowledge(0)Amend(0)
144Your gratuity increases with the increase in the service period. However, to be eligible for gratuity, you must complete 5 years of service (which is more than 4 years and 6 months).
For the gratuity calculation, the years of service are rounded off to the nearest whole number. This means that if you have completed 7 years and 7 months of service, the length of service considered for gratuity calculation would be 8 years. Similarly, if you have completed 9 years and 5 months, the duration for gratuity calculation would be 9 years.
According to the law, for gratuity calculation, your salary will include only the following components:
- Basic Salary
- Dearness Allowance (if any)
This implies that House Rent Allowance (HRA), bonus, special allowance, and reimbursements are not considered in the gratuity calculation. This explains why private sector employers often aim to keep the basic salary low.
Regards
From India, Surat
Acknowledge(0)Amend(0)
At first, how can a company deduct any percentage from the salary in order to pay gratuity? There are no provisions for such deductions, unlike PF. The gratuity is to be paid by the employer from his pocket only. First, get this fact cleared.
Now, related to the applicability, if you have served for 5 or more years (4 years and 240 days in the last year), you will be entitled to gratuity. Gratuity is to be paid on the last drawn wages (Basic+DA) by 26 x 15 days x the number of years.
From India, Kolkata
Acknowledge(0)Amend(0)
Now, related to the applicability, if you have served for 5 or more years (4 years and 240 days in the last year), you will be entitled to gratuity. Gratuity is to be paid on the last drawn wages (Basic+DA) by 26 x 15 days x the number of years.
From India, Kolkata
Acknowledge(0)Amend(0)
It will be better if you discuss with your own HR to get a clear picture. It will be better if he does not deduct 4.81% from CTC towards Gratuity as it is well understood that you are not completing 5 years of service till your superannuation, so you will not be entitled to claim gratuity.
From India, Bahadurgarh
Acknowledge(0)Amend(0)
From India, Bahadurgarh
Acknowledge(0)Amend(0)
Gratuity Payment Eligibility and CTC Restructuring
Service of 4 years and 5 months will not entitle you to payment of Gratuity as per the provisions of The Payment of Gratuity Act, 1972. The CTC structure generally prevalent in most companies includes Gratuity as a standard component, as it is calculated as 4.81% of the Basic Salary.
As I understand from your post, your HR person must have fixed your CTC as per the standard structure without considering your maximum service period up to retirement age. I would suggest that you bring this to their attention and request CTC restructuring on these grounds. You can email the concerned HR Executive who negotiated the CTC with you and also copy the HR Head. Most likely, they will consider the facts positively and adjust the amount under a different component.
Regards,
Jaspreet Singh Janeja
From India, Chandigarh
Acknowledge(1)Amend(0)
Service of 4 years and 5 months will not entitle you to payment of Gratuity as per the provisions of The Payment of Gratuity Act, 1972. The CTC structure generally prevalent in most companies includes Gratuity as a standard component, as it is calculated as 4.81% of the Basic Salary.
As I understand from your post, your HR person must have fixed your CTC as per the standard structure without considering your maximum service period up to retirement age. I would suggest that you bring this to their attention and request CTC restructuring on these grounds. You can email the concerned HR Executive who negotiated the CTC with you and also copy the HR Head. Most likely, they will consider the facts positively and adjust the amount under a different component.
Regards,
Jaspreet Singh Janeja
From India, Chandigarh
Acknowledge(1)Amend(0)
CTC has always been a tool to fool employees into thinking that they are getting paid more than they are actually paid. In your case, it seems to be the perfect example. There is a good chance you will not get that money because you are not eligible for it. There is little you can do except request HR to change your salary structure since you will not be eligible for gratuity.
From India, Mumbai
Acknowledge(0)Amend(0)
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.
CTC Structure.xls