Gratuity part of CTC

Is the gratuity part of CTC.

If yes, then please provide the notification.

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Hey @Mudassir ,

Yes, gratuity is typically considered a part of the Cost to Company (CTC) package in India. According to the Payment of Gratuity Act, 1972, gratuity is a statutory benefit provided to employees by the employer as a token of gratitude for the services rendered by the employee. It is paid when an employee completes five or more years of continuous service in an organization.

While the Payment of Gratuity Act doesn’t explicitly mention including gratuity in CTC, many organizations include it as a component of the CTC package. This is because gratuity is an eventual liability for the employer and is calculated based on the employee’s last drawn salary and the length of service. Including gratuity in CTC helps organizations allocate funds for this liability and provide a comprehensive picture of the employee’s overall compensation.

However, it’s important to clearly communicate to employees whether gratuity is included in the CTC or provided separately. Employers should also adhere to the guidelines and calculations set forth by the Payment of Gratuity Act to ensure compliance.

Please note that it’s advisable to consult with legal experts or HR professionals to ensure accurate interpretation and implementation of gratuity in the CTC package.

Hope that helps.

Community Manager.

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Thank you, Trisha, for above reply.

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As per understanding, There is no any provision to add gratuity in CTC, however some organization are add and some are not.

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I would claim that this is an incorrect assessment.

It is a statutory benefit. This means it is mandated by law. For example, it is mandated to allow 12 days of sick leave and 18 days of earned leave per year in Maharashtra. But the employer cannot add 30 days leave as a benefit and part of CTC.

Now let’s take for example CTC - every component of the CTC is either to be paid out to the employee or on behalf of the employee as a tax. So EPF - paid can be taken part of CTC since regardless of when employee leaves he is the owner of the benefit allocated to him.

In case of Gratuity, the statutory benefit comes under the ownership of the employee only when he completes 5 years. Therefore that benefit included as a statutory requirement cannot be part of CTC until he has completed 5 years. The reason is that if the employee leaves in the 3rd year of employment he cannot get any amount of the benefit allocated to him in the CTC.

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I agree with this. Though Gratuity is part of CTC, employee do not get their money, when they leave before 5 yrs.
Same case for leave encashment.

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