05 November 2008
I have joined a MNC, they have clupped the gratuity into my CTC part. 1)Gratuity is a part of CTC or not? 2)What would happen If I leave the company before 5 years than I am eligible to get my gratuity amount or not? 3)There is any law which can support me to do the case on company for gratuity?
05 November 2008
if gratuity was a part of your CTC which is actually an Annual Pay Package and you have not completed 5 years than this is a kind of a minor fraud for the reasons cited below.
1. You have not completed 5 years and yet the company is "deducting" funds from your annual pay package (CTC) towards this component by terming it as "Gratuity" in contravention of the Payment of Gratuity Act 1972
2. You have not physically received this amount in your salary/annual payment and this component has been retained by the management.
3. Gratuity is a statutory requirement necessitated by PGA 1972 and is termed as a "Terminal Benefit". As such this should have no bearing on your Annual Salary during the course of your employment..
4. Most of all; Until the completion of 5 years (of the employee) the company does not have any statutory adherence requirement of Gratuity, and hence mentioning this in your CTC before the 5 year period should be termed as illegitimate.
Since the amount has been deducted (not paid to you) annually from the CTC, should you leave before the completion of 5 years you should be able to demand this back as an Ex Gratia Payment.
The company tends to include all costs that it incurs on the employee in the CTC. However during the first 5 years, there is no cost that the company will incur due to the PGA 1972. my suggestion therefore to HR Managers and heads is to keep Gratuity out of the CTC for the first 5 years. In the fifth year you could include the component using the following calculation so as to cover the Cost to the company
Gratuity = Current basic X 15 X 5 / 26 wherein 5 is the number of years worked
In the subsequent years the formula can be returned to the one recommended in the PGA 1972