Does Employee Needs To Pay Gratuity From His Salary ?

Respected All,
I have received an offer letter from an organization wherein they have offered me basic of 10329 and also they are deducting Rs. 497 from my monthly gross salary as a part of gratuity. Am i actually supposed to pay this from my salary ? and if yes then on what basis is this amount been decided ?

Hi
Gratuity is paid by the employer to their employees where an employee worked minimum of 5 years with them as part of a retirement/resigning benefit stated by the law/ACT. Deducting from employees GROSS salary is not a fair one. But they can show it in CTC as part of the employer's contribution to an employee. So do check with them, its well and good if it is a part of CTC or if it is on gross, they cant do so.

Gratuity is the reward in the form of money from an employer to his employee on his termination for his past services given as a gratitude towards the services rendered. As Mr. Christopher has advised that it cannot be deducted from the Gross Salary but can be adjusted in CTC, I strongly state that it should not be even adjusted in CTC as a component, because logically it should be given from the pocket of the employer and not to be counted as CTC component. But nowadays we HR personnel guide the employer to utilize this component as part of CTC.
As per my view this is not a fair practice by the employer, it is up to you whether you accept it or not.

Thank you gentlemen for you valuable inputs , with the help of inputs provided by you I have requested my HR to explain that to me before me accepting the offer. I would keep you posted on it.
Thanks :)

Few Companies and HR's are very smartly using the term CTC and put all their expenses towards an employee is under their CTC either it is the matter of EPF, gratuity or other and on asking for the same by an employee they say that the particular amount they are investing for the employee and that;s why it comes under CTC.
But ideally, a company should not add or deduct any amount from the salary as gratuity and good companies are following the same.

HI
CTC means cost to the company and not cost to the employee. Its always better to include all direct and indirect cost in the CTC for better understanding, Today everybody is well aware of salary break up given by an employer. We cant just like that rate a company with their CTC workings. Only concern here is if the HR person detailed the breakup after of before the offer, then there wont be any doubts/queries raised because of this. So, its not harm to include anything with a briefing to the employee.

Dear Christopher
As I stated earlier Gratuity cannot be included in CTC Component, because Gratuity is paid as a gratitude towards the employee for his continuous service rendered to the employer i.e. loyalty to the employer it is more or less like a tip for the service rendered. If we calculate Gratuity as a part of CTC what if an employee leaves the company within a span of 2-3 years.
With regards to including all direct and indirect cost in the CTC, why leaves, weekly offs and holidays are not counted in monetary terms and included in CTC component. It is also a cost to the employer isn't it.
My conception may be wrong, seniors please advice

Dear Saji,

The concept of CTC has been well explained by Mr.Christopher. The Gross salary is the salary payable to the employee on a monthly basis. Thereafter LTA, Medical reimbursement, Bonus etc are payable to the employee as per the terms and conditions of employment and statutory provisions.

However, the employer on his part has to make provisions for his liability in respect of employees working in the organisation. With this in view components such as Gratuity, PF, Superannuation, Cost of Uniform, Canteen facility, Transport facility, Premium paid towards Mediclaim, Personal Accident Policy etc are added and shown as Cost To Company (CTC).

In other words if the employee were to join some other organisation which does not

a) Offer PF coverage (by applying the wage ceiling available under the act),

b) have Superannuation benefits (Generally 15% of the employees basic salary is invested in LIC's superannuation scheme, from which the employee gets benefits on his superannuation or separation from service after fulfilling conditions laid down under the scheme)

c) provide Uniform (If the company does not provide uniform the employee needs to buy shirting & suiting for his daily wear to the organisation)

d) have canteen facility (if there is no canteen the employee has to make his own food arrangements)

e) have Transport facility (if there is no transport facility he has to commute to the place of work at his own expense)

f) have a Mediclaim facility (either the employee & his family are not covered or the employee has to pay premium from his pocket)

g) have a Personal Accident Policy (The employee may loose the weekly benefit available under the Policy and the compensation payable to his dependents in the event of an unfortunate death of the employee)

Either the employee has to spend additionally or does not get accrued benefits from the employer.

Weekly off, Holidays etc are offered by almost all companies and hence comparison may not be relevant. For the employee to make an apple to apple comparison CTC is shown by employers for him to draw his own conclusion

This is the reason why companies show this as part of CTC to indicate to the candidates the benefits in addition to the salary being paid. Some companies even show variable pay packages such as performance incentives as part of CTC. If the employee/ company performs he gets the incentive to the extent of performance.

In this context showing perquisites/ benefits as part of CTC is not uncommon among employers.

Regards

M.V.Kannan

Dear Mr Kanan

According to my view facilities like Canteen/Uniforms/Medical etc. cannot be counted in CTC, as such Medical is a statutory requirement which the employer has to provide as per the relevant statutes. If an employee who is Jain/Swaminarayan would not prefer to take the food available in the canteen, he may bring tiffin, would you force him to take the canteen facility ?. Uniform is provided to show the uniformity among the employees, I have a lady candidate who belongs to Muslim community and wear her burqa she refused to wear the uniform which is against her religious ethics, should we force her to wear the uniform or should we terminate her for just not wearing the uniform. These all facilities provided by any company cannot be forced to the employee and thus cannot be part of CTC.

With regards to Gratuity it is given at the time of leaving the organization and given as a gesture, which we are not sure whether the employee will be with the company for not less than 5 years.

Last but not the least it was not to hurt the sentiments of either Mr. Christopher or any HR fraternity but have revealed my views, which is not necessarily to be accepted by anyone.

Dear Mr Kamble,
Gratuity Calculation = [ (Basic Pay + D.A) x 15 days x No. of years of service ] / 26
If I consider even your DA to be nil, then also at the end of 5 years you are entitled to Rs 29,795/- as gratuity.
The organisation is deducting Rs 497 per month from your salary. So, if you calculate 497 x 12 x 5, it comes to Rs 29,820 !!!!!!!!
For the first time in my life am I hearing of such abuse of a good HR practice of rewarding an employee for his loyalty.
Do consider a number of times before considering the offer - this may just be the tip of an iceberg of Hr manipulation.
Regards,
Dr Parveen Ahmed Alam