Regarding Gratuity

Dear All,

Is it common practice to pay out gratuity to employees while they’re actively employed? I know employers include gratuity as part of CTC however wondering if we need to pay a portion of gratuity to people on a monthly basis?

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Yes you can if your employer register with Gratuity act

Hi,

Gratuity component shown under Salary Structure and its part of CTC.

It should be only paid to employees at the time of leaving as per Gratuity eligibility. basis on the no of years they have worked.

If if Fixed term employee, Then gratuity should be after completion of 1 year and if it is regular employee then it 4 years 240 days.

Regards
Ramanath Setty

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Could you please elaborate on this? I haven’ heard employers paying gratuity on a monthly basis. Hence requesting more details on this. TIA

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Thank you! Appreciate it.

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Agree to @Ramanath. Never noticed an organization showing gratuity as a monthly payslip component. It is considered as part of CTC in private sector but paying to employees on a monthly basis is a new information. Need to understand more about this - fellow members please

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Yes, if included in CTC. Day wise cal. And need to pay. Irrespective of 5 years completion.

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Gratuity is only payable after the completion of 5 years. But if it is included in CTC, do we disburse the monthly Gratuity to the employees even if they have not completed 5 years with the organisation?

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So if an employer has gratuity as a part of CTC and an employee resigns in 2 years , is it mandatory for the employer to pay back the deducted amount?

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It is not necessary to pay to employee.

As the name indicates CTC(Cost to Company), Gratuity is added after the gross hence it is not deducted from employee and it is benefit to employee that CTC amount is high. Gratuity is one of the Reterial benefit from the company and he will get paid only if he has completed 4 years 240 days.

Regards
Ramanath Setty

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No necessary, as per gratuity Act.it will be paid after completion of 5 year or 4 year 240 day depend, in case of exit then only.

Regards

Jitendra Singh

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Hi Vighneshvr

Yes, if it is included in the CTC and the employee resigns before completion of 5 years then the deducted amount needs to be paid back.

Usually, gratuity is a separate component paid by an employer as a gift to an employee for 5 years of association.

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Thank you. It helps.

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Gratuity is a retirement benefit and the employer has to pay. If it will be treated as a Gift then discretion of the employer will work there. If any company does not provide gratuity benefits then an employee can go for legal actions.

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It also depends on the number of employees in the company… If the strength is below 10, then it is not mandatory…

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Jaishree ,

Gratuity needs to be paid only once the employee leaves the organisation after completing the eligible statutory duration with the company .

I think the confusion is with the term CTC ; CTC is cost to company which means all the cost the company is bearing on account of the employee. Since a company is liable to pay gratuity to every employee once they complete the duration, companies ear mark the proportionate amount in their books and thus also under the cost of each employee. It is not payable monthly.

Trust the above is clear.

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It is not necessary to pay monthly to Employees since it is included in CTC.

As per the judgment of the Supreme Court an employee is eligible for gratuity if he has completed 4 years of continuous service and 240 days continuous working in 5th year. On the day when he completes his 240 days in the 5th year he will be eligible for gratuity

However, as per a ruling made by the Madras High Court, individuals who have completed 240 days in their fifth year of service are eligible for gratuity

Regards

Nithya Srinivasan
Sr. Manager - Finance
Mob: 98415 33942
CogNet HR Solutions Pvt. Ltd.

32, M.T.H. Road
Ambattur, Chennai 600098
Ph: 044 4901 2970

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Yes correct. Need to paid back, before completion of 5 year also. If shown in CTC.
If resigned.

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@Ramanath Hi Please confirm why 4 Years 240 days ?
And I have noticed that many companies mention gratuity and employer contribution in CTC breakup and considered under gross - is this correct ?
Ex - if employee CTC is confirmed as 5 L INR - This includes Gratuity also.

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Agreed. A provision for gratuity should be created in the books of accounts so that the company should have enough funds for the disbursement of the gratuity amount.

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