CTC is used as one of the components for HR budgeting. It is also a motivational tactic to show big figures of CTC where the candidates get carried away and join and later comprises or leave the Org. Yes, you are right, there are labour court cases claiming gratuity deductions as non-statutory deductions as part of CTC and therefore liable for payment of gratuity. International companies pay gratuity annually in Mumbai. However, statutory gratuity is payable after an employee complete 4 years 240 days of continuous service.
From India, Mumbai
9From India, Mumbai
Dear friends,
It's high time everyone should be clear some of the facts already discussed here by learned members. To summarise them -
1. Indian laws doesn't offer any, any interpretations about CTC.
2. Practicing, imposing or accepting & interpreting CTC is the prerogative of employers & employees & at one's own cost & risk.
3. Even courts have not spelt out any codifications on CTC.
4. Though, generally gratuity is considered as part of CTC there is no hard and fast rule whether to include or excluded and what are all.
5. Even Gratuity Act also doesn't say anything about CTC.
6. Irrespective of whether or not included in CTC, gratuity is payable when an employee leaves an employer subject to ONLY after completion of a qualifying "continuous service" of 5 years ( 4 yrs + 240 days in the 5th year) with the very same employer (except when he/she forfeit gratuity as per law on certain lawful grounds).
7. Even when included as part of CTC, gratuity is NOT payable monthly as it is not part of gross salary or take home salary.
8. There is no legal obligation for an employer to open a bank a/c and invest gratuity fund on monthly basis. However it's the legal responsibility of an employer to create adequate provisions/liability towards gratuity in their Annual Accounts which is compulsory as this is meant to defray gratuity obligations of the employer.
9. In case of non-payment of gratuity to a legally eligible employee, the employee can seek intervention of appropriate officers & legal remedies. In which case the employer is liable to pay over due interest on delay in payment of gratuity at prescribed rates. Therefore there cannot be loss even when payment is delayed.
10.Above all gratuity is NOT contributory like EPF from employees' side as employers have to contribute 100% including over due interest.
Individual queries if any, on certain complications can be addressed.
From India, Bangalore
It's high time everyone should be clear some of the facts already discussed here by learned members. To summarise them -
1. Indian laws doesn't offer any, any interpretations about CTC.
2. Practicing, imposing or accepting & interpreting CTC is the prerogative of employers & employees & at one's own cost & risk.
3. Even courts have not spelt out any codifications on CTC.
4. Though, generally gratuity is considered as part of CTC there is no hard and fast rule whether to include or excluded and what are all.
5. Even Gratuity Act also doesn't say anything about CTC.
6. Irrespective of whether or not included in CTC, gratuity is payable when an employee leaves an employer subject to ONLY after completion of a qualifying "continuous service" of 5 years ( 4 yrs + 240 days in the 5th year) with the very same employer (except when he/she forfeit gratuity as per law on certain lawful grounds).
7. Even when included as part of CTC, gratuity is NOT payable monthly as it is not part of gross salary or take home salary.
8. There is no legal obligation for an employer to open a bank a/c and invest gratuity fund on monthly basis. However it's the legal responsibility of an employer to create adequate provisions/liability towards gratuity in their Annual Accounts which is compulsory as this is meant to defray gratuity obligations of the employer.
9. In case of non-payment of gratuity to a legally eligible employee, the employee can seek intervention of appropriate officers & legal remedies. In which case the employer is liable to pay over due interest on delay in payment of gratuity at prescribed rates. Therefore there cannot be loss even when payment is delayed.
10.Above all gratuity is NOT contributory like EPF from employees' side as employers have to contribute 100% including over due interest.
Individual queries if any, on certain complications can be addressed.
From India, Bangalore
Dear All, Gratuity is part of CTC and if you were exit before complete of 5 years then as per compliance it will payout as "Exgratia" Regards Dhananjoy Kumar
From India
From India
If CTC break up simply says Gratuity, then , in my opinion, the employee has a right ti get Gratuity as mentioned in the Offer letter. In addition, jf he or she completes minimum stipulated period under the Payment of Gratuity Act, then he or she is eligible to receive Gratuity under the Act as well.
Alternatively, if the CTC description clearly says Gratuity under Payment of Gratuity Act, then the employee is eligible only under the Payment of Gratuity Act after completing stipulated service.
However, this has no been tested in any court as of now. If CTC description simply says Gratuity, then the employee can only move Civil Court and can not file a pettition under Payment of Gratuity Act.
There are many judgements on wages and salaries but to my knowledge there is no Judgment on the term CTC as it has no place in Labour Law as on date. One needs to move a civil court to get correct verdict on this subject.
However, I always advise my clients to use the terminolgy Gratuity under Payment of Gratuity Act when giving break up of CTC
T Sivasankaran
From India, Chennai
Alternatively, if the CTC description clearly says Gratuity under Payment of Gratuity Act, then the employee is eligible only under the Payment of Gratuity Act after completing stipulated service.
However, this has no been tested in any court as of now. If CTC description simply says Gratuity, then the employee can only move Civil Court and can not file a pettition under Payment of Gratuity Act.
There are many judgements on wages and salaries but to my knowledge there is no Judgment on the term CTC as it has no place in Labour Law as on date. One needs to move a civil court to get correct verdict on this subject.
However, I always advise my clients to use the terminolgy Gratuity under Payment of Gratuity Act when giving break up of CTC
T Sivasankaran
From India, Chennai
Answer is not clear yes or no.
In CTC concept, generally there is notional debit of certain amount from CTC. Because the amount agreed as remuneration is not being paid but kept aside to be paid towards gratuity. While in other cases, in older pay structure philosophy which is also known as GPA or Gross per Annum, where the gratuity is Benefit and was being paid over and above the agreed remuneration.
Gratuity is loyalty bonus, and if the amount towards loyalty bonus is from employee’s committed CTC, ethically companies are bound to pay irrespective of the eligibility tenure, yeah it may not be termed as Gratuity but can be said as Ex gratia. On ex gratia there will not be any Income Tax relief.
So it depends on the company’s policy, progressive and ethical companies if makes debits/provision towards Gratuity from employees' CTC, they do pay as ex gratia prior to 5 years’ tenure and as Gratuity upon completion of 5 years.
Shailesh Parikh
9998971065
From India, Mumbai
In CTC concept, generally there is notional debit of certain amount from CTC. Because the amount agreed as remuneration is not being paid but kept aside to be paid towards gratuity. While in other cases, in older pay structure philosophy which is also known as GPA or Gross per Annum, where the gratuity is Benefit and was being paid over and above the agreed remuneration.
Gratuity is loyalty bonus, and if the amount towards loyalty bonus is from employee’s committed CTC, ethically companies are bound to pay irrespective of the eligibility tenure, yeah it may not be termed as Gratuity but can be said as Ex gratia. On ex gratia there will not be any Income Tax relief.
So it depends on the company’s policy, progressive and ethical companies if makes debits/provision towards Gratuity from employees' CTC, they do pay as ex gratia prior to 5 years’ tenure and as Gratuity upon completion of 5 years.
Shailesh Parikh
9998971065
From India, Mumbai
Friends,
Could you post/share info of any instances of gratuity when followed under CTC pattern was paid in cash/cheque/cr.to a/c or in any manner by in any co/firm. Obviously employers will have to pay gratuity to those employees when they leave their firm if the employees completed 5 yrs continuous service as per the Gratuity Act and there is no confusion. Whereas what we are deliberating is in case employees leave firms before completing 5 yrs of qualifying service for gratuity and if so how they are paid the component towards gratuity form part in CTC pattern. We have been believing in such instances, these firms do not pay anything as gratuity and thus concerned employees are deprived of their share of CTC. Hypothetically, assume Mr.X, throughout his career, say till his superannuation age of 60, went on changing his employers, in every such change over, before completing 5 yrs and therefore Mr.X never tasted any gratuity in his life time just because i) he didn't complete 5 yrs with any of his employer and ii) all his employers followed only CTC. Does this fit into logic ? What's the solution ?
From India, Bangalore
Could you post/share info of any instances of gratuity when followed under CTC pattern was paid in cash/cheque/cr.to a/c or in any manner by in any co/firm. Obviously employers will have to pay gratuity to those employees when they leave their firm if the employees completed 5 yrs continuous service as per the Gratuity Act and there is no confusion. Whereas what we are deliberating is in case employees leave firms before completing 5 yrs of qualifying service for gratuity and if so how they are paid the component towards gratuity form part in CTC pattern. We have been believing in such instances, these firms do not pay anything as gratuity and thus concerned employees are deprived of their share of CTC. Hypothetically, assume Mr.X, throughout his career, say till his superannuation age of 60, went on changing his employers, in every such change over, before completing 5 yrs and therefore Mr.X never tasted any gratuity in his life time just because i) he didn't complete 5 yrs with any of his employer and ii) all his employers followed only CTC. Does this fit into logic ? What's the solution ?
From India, Bangalore
Dear All
Appreciate inputs from various learned members on gratuity. However the following may please be clarified.
1.Where is it mentioned that an employee 4 years and 240 days of service will be entitled for gratuity. This is debatable. Is it through high court decision ( chennai, if i remember it) , if so , is a decision of high court applicable only to the particular state or is it applicable to all over india??
2. In general it is 5 years of continuous service for entitlement, where 5 years and beyond 6 months is 6 years, else it will be for 5 years.
3. If the word 240 days is used, ( does it include weekly Off's, holidays, leaves ) or is it on working days or calendar days?? There is no clarity on this . ?
Can somebody please throw light on the above??
Thanks.
From India, Visakhapatnam
Appreciate inputs from various learned members on gratuity. However the following may please be clarified.
1.Where is it mentioned that an employee 4 years and 240 days of service will be entitled for gratuity. This is debatable. Is it through high court decision ( chennai, if i remember it) , if so , is a decision of high court applicable only to the particular state or is it applicable to all over india??
2. In general it is 5 years of continuous service for entitlement, where 5 years and beyond 6 months is 6 years, else it will be for 5 years.
3. If the word 240 days is used, ( does it include weekly Off's, holidays, leaves ) or is it on working days or calendar days?? There is no clarity on this . ?
Can somebody please throw light on the above??
Thanks.
From India, Visakhapatnam
1.Where is it mentioned that an employee 4 years and 240 days of service will be entitled for gratuity. This is debatable. Is it through high court decision ( chennai, if i remember it) , if so , is a decision of high court applicable only to the particular state or is it applicable to all over india??- Applicable only for respective STATE i.e. Tamilnadu
2. In general it is 5 years of continuous service for entitlement, where 5 years and beyond 6 months is 6 years, else it will be for 5 years. - Correct
3. If the word 240 days is used, ( does it include weekly Off's, holidays, leaves ) or is it on working days or calendar days?? There is no clarity on this . ?- All days including Paid Holiday, Weekly Off, All Authorized leave are covered to calculate 240 days / 5 years service
From India, Pune
2. In general it is 5 years of continuous service for entitlement, where 5 years and beyond 6 months is 6 years, else it will be for 5 years. - Correct
3. If the word 240 days is used, ( does it include weekly Off's, holidays, leaves ) or is it on working days or calendar days?? There is no clarity on this . ?- All days including Paid Holiday, Weekly Off, All Authorized leave are covered to calculate 240 days / 5 years service
From India, Pune
Dear friends,
This part of interpretation is being discussed in this forum almost for a decade now. Seekers, please take atleast a few minutes to refresh past postings on the matter being discussed. This will avoid oft-repeated matters raised all over again. Pl.be informed
e judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service. As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity."
The gratuity act says continued services. The continuity in service is clarified by SC a year means 240 working days in a different context but nothing is stopping you to adopt the sum & substance of the concept while applying. Hence , an employee who has completed 4 years 8 months and 18 days continuously without any break is eligible for Gratuity under the Act.
For further reading use this link-
https://www.citehr.com/108564-sc-jud...-download.html
From India, Bangalore
This part of interpretation is being discussed in this forum almost for a decade now. Seekers, please take atleast a few minutes to refresh past postings on the matter being discussed. This will avoid oft-repeated matters raised all over again. Pl.be informed
e judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service. As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity."
The gratuity act says continued services. The continuity in service is clarified by SC a year means 240 working days in a different context but nothing is stopping you to adopt the sum & substance of the concept while applying. Hence , an employee who has completed 4 years 8 months and 18 days continuously without any break is eligible for Gratuity under the Act.
For further reading use this link-
https://www.citehr.com/108564-sc-jud...-download.html
From India, Bangalore
Dear Mr.Kumar
Thanks for your insight. Has the gratuity act amended to above affect?? Has there been a gazette notification , Appreciate if you any information on this?
I think it is no. Then the interpretation of this for now left to individual employer. Barring few companies, most companies would avoid extra outflow, if the service is below 5 years service.
Also, in some cases the Gratuity is shown under CTC and part of the employee's compensation. But here also certain companies might pay and few others might not pay.
Thanks and warm regards
From India, Visakhapatnam
Thanks for your insight. Has the gratuity act amended to above affect?? Has there been a gazette notification , Appreciate if you any information on this?
I think it is no. Then the interpretation of this for now left to individual employer. Barring few companies, most companies would avoid extra outflow, if the service is below 5 years service.
Also, in some cases the Gratuity is shown under CTC and part of the employee's compensation. But here also certain companies might pay and few others might not pay.
Thanks and warm regards
From India, Visakhapatnam
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