Please give me advice about how can count the gratuity per month in CTC

Dear Bijay,

Take the below as an example for your understanding - increment is done in basic salary every year:

1st Year - Basic Salary (p.a.) = 84,000 - Gratuity Shown in CTC = 4,040.4 (i.e., 4.81% of Basic Salary)

2nd Year - Revised Basic Salary (p.a.) = 96,000, Gratuity Shown in CTC = 4,617.6

3rd Year - Revised Basic Salary (p.a.) = 96,000, Gratuity Shown in CTC = 4,617.6

4th Year - Revised Basic Salary (p.a.) = 108,000, Gratuity Shown in CTC = 5,194.8

5th Year - Revised Basic Salary (p.a.) = 120,000, Gratuity Shown in CTC = 5,772

6th Year - Revised Basic Salary (p.a.) = 132,000, Gratuity Shown in CTC = 6,349.2

The last drawn basic was 11,000 p.m. Hence, Gratuity calculation will be done as (11,000/26) X 15 X 6 years = Rs. 38,077/-

Gratuity is shown in CTC or not shown in CTC is irrelevant. If an employee has worked for 5 years and above, then it is applicable upon separation from employment. To claim Gratuity, an employee can fill out FORM-I as per the Gratuity Act. In case of death, the employee's nominee can claim gratuity under FORM-J.

It is mandatory by law; hence, the question of whether it is shown in CTC or not shown in CTC does not arise.

HR Department

BrainLight HR Solutions

Yes, Mr. Subbarao. It should be 4.8% of basic plus DA, not gross. I neglected to mention that. My apology to members for that. However, if the intent is to show the actual cost to the company (as opposed to the normal purpose of making a fool of candidates), then we need to have a model of how the gratuity liability increases with an increase in salary and add that to the annual CTC.

Dear Mr. Sharma,

The exact calculation is Last Basic / 26 x 15 days per year x length of service = Total amount payable to a person who is leaving the service. The eligibility criteria are as follows: completion of service beyond 5 years 1 day.

Last basic: Basic salary at the time of resignation. If a person works beyond 6 months after the eligible limit, he is eligible for 6 years. If it is less than 6 months, 5 years will be taken as eligibility.

Dear Members,

The basic question was confusing. The actual required information for Mr. Sharma was the monthly % of Gratuity. It is 4.8% on Basic + DA (in a few companies there is no DA funda for management staff). If the total is shown as Basic, we should calculate on the same as 4.8%, but this does not arise. Generally, we will show this component in the CTC statement while computing for increment letters/issuing appointment orders. Even this 4.8% will be taken into the budget while computing the company's budget along with leave wages (all these will be furnished to Accounts through HR Dept).

I am also sorry that the settlement of Gratuity was mentioned by me.

Hello BrainLight,

Could you please share calculations/formulas for contract workers? Is it the same, or is there a different measurement for calculating gratuity for contract workers?

Thanks,
Karuna

So is there any validity if an employee tells a fixed-term contract employee working full time that they are not eligible for gratuity because they didn't have any salary breakup or statutory deductions?

Merely because the employee draws a fixed salary and there is no salary break up or statutory deduction, gratuity liability is not exempted. Gratuity is a legal right conferred by the Payment of Gratuity Act 1972 and if there is an entitlement as per the statute, it has to be paid, there is no escape from it.

I just realized a giant shake-up that the company has done overnight, most probably to deal with tax officers over who is who in the company. I was called up a few months back just before the renewal of the annual contract and told to immediately print and submit a document sent to me. Failing to do so would result in my salary being put on hold.

Until now, there has only been a formality for the sake of "renewing" contracts, which practically happened automatically. For the sake of paperwork, they used to ask us to sign a paper stating that the agreement signed that day is being extended for one more year. The fine print in the latest letter I signed says (freshly added, never before in the preceding 9 years):

"The consultant agrees that he is not eligible for any statutory benefits that accrue to employees pursuant to Indian Labor Legislation (such benefits, the "benefits"). Notwithstanding anything contained herein, the consultant further agrees to waive any rights to benefits that may potentially accrue to the consultant."

This comes after I have served 9.5 years in the company, and overnight, EVERYWHERE, including the company's telephone directory and my email, the title under my name now shows "Consultant" instead of the earlier "Senior Manager."

I seldom bother to check with HR about what they ask me to sign or what papers they ask me to submit further because the company has been pretty good at looking after its employees and has always ensured to give more than they are legally obliged to provide. However, after some recent turn of events and churning of top management, I really don't know what is going on.

I am reporting to a person and am working like any other employee. Designations such as Senior Manager are given based on seniority, and I don't have staff reporting to me. In our department alone, we have about 12 people reporting to the HOD, who sends monthly rosters showing people's leaves, timings, etc. About four from this department are on "payroll," while the rest choose to keep renewing their contracts.

I have NO independence whatsoever and am obliged to obey my boss no matter the orders given, just like any other subordinate of hers. I can't choose to refuse work or take a day off without prior formal leave application. I work a full 9 hours officially, but in practice, it extends to 12 hours, five days a week.

I don't know what kind of tax evasion the company is attempting, but now it seems that upon resigning, I won't be given gratuity benefits. A person from human resources, instead of replying to my text, called me and aggressively stated that there are no gratuity benefits for contract staff, without allowing me to explain that gratuity is non-negotiable if the employee-employer relationship has been observed in practice, regardless of the wording used in official letters.