Gratuity - Employee Salary [Thread 262779]

Hello friends,

Is it necessary to give gratuity to all the employees who have been with the company for more than 5 years? Provided we don't deduct the amount from the salary.

Regards,
Nidhi

Dear Nidhi,

As per the Payment of Gratuity Act, 1972, it is mandatory to give gratuity to all employees who have been serving the company for more than 4 years and 8 months (as a result of a judgment from the Madras High Court), irrespective of whether it has been deducted from the salary or not.

Regards,
Amitava Majumder

Dear Amitava Majumder,

Thank you so much for your reply. I want to clear a few doubts:

1) Will it be calculated based on the last salary drawn?
2) If an employee resigns after 12 years, will it be calculated at 15 days per year accordingly?
3) If the employer doesn't provide gratuity, will it create a problem? Are its records to be maintained?

Please reply. Thank you in advance.

Regards,
Nidhi

Dear Seniors,

Can you help me out to solve the above-mentioned doubts.

Waiting for the reply.

Dear Nidhi,

Please note the formula for gratuity as follows:

1) Last Basic Drawn/26 * No. of Years of Service * 15

2) Yes, it will be calculated for 15 days.

3) He can go to the labor court if the employer doesn't give the gratuity.

Regards,
Sunny Mahajan

Hi Chander,

My query is solved. I just want to know one thing, i.e., in the 1st year when A joined the company, his salary was 6000. Today, after 12 years, his salary is 14000. So now, if he resigns, he will get 14000/26 * 15 days * number of years of service. Management has to provide this; it is compulsory.

Should gratuity be added to the CTC structure, or does it depend on the company?

Please reply.

Regards,
Nidhi

Dear Nidhi,

You have got the calculation absolutely right. Yes, it's compulsory for the management to make the payment towards gratuity. If included in the CTC structure, the employee can ask for the portion deducted even though he might not have actually worked for the eligible period. This is a catch point that has to be handled carefully.

Regards,

Amitava

Hi Amitava,

Thank you for the reply.

So, the point is if we deduct the gratuity amount and show it in the CTC, the employee can still ask for the money after 2 years when they resign as they are eligible for it. The accumulated money for 2 years is to be given when the employee leaves. Can the employer argue by saying that the employee has not completed 5 years of service, so they cannot receive this money?

Regards,
Nidhi

Dear Nidhi,

Yes, we have to consider the last drawn basic. As per the new amendments of the act, you should not add it in the CTC structure.

Regards,
Leela

Dear Nidhi,

Thank you for the reply. So the point is, if we deduct the gratuity amount and show it in CTC, even the employee can ask for the money after 2 years when he resigns as he is eligible for that. The accumulated 2 years' money is to be given when he leaves. Can the employer argue by saying you have not completed 5 years of service so you cannot get this money?

Regards,
Nidhi

Dear Nidhi,

No, the employer is supposed to pay the employee after having deducted from CTC once he/she quits/resigns from the company. However, there are greedy people who don't want to pay. In this case, if the employee has time to go to the labor court, then he can do so.

Regards,
Prakash