I humbly disagree with some of the experts here. (some have already disagreed like me, in this thread) Payment of gratuity may be illegal if the employee has not completed 5 years of continuous service, but having committed to treat it as part of the employee cost to company, is it not correct to expect the employer to refund the cost so committed by him through the appointment letter, even by calling it something else? After all he has committed it through the appointment letter. I have even come across a case where the gratuity was paid after completion of even 4 years because it was included in CTC...
He may make it subject to Income tax though.
Further please enlighten me if the gratuity act expressly bars payment of gratuity when the employee does not complete 5 years. True it makes the employer duty bound to make the payment after 5 year of service. Which section bars it without completion of 5 years in case employer still wants to pay it? - A S Bhat
From India, Pune
51He may make it subject to Income tax though.
Further please enlighten me if the gratuity act expressly bars payment of gratuity when the employee does not complete 5 years. True it makes the employer duty bound to make the payment after 5 year of service. Which section bars it without completion of 5 years in case employer still wants to pay it? - A S Bhat
From India, Pune
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To my knowledge NO DEDUCTION from salary of employees being effected by any employer. This component is only shown/included in the CTC to the extent of eligibility every year to project the sum of annual cost of every employee to the Co on accrual basis. Neither gratuity is payable on monthly basis nor annual basis like salary. If somebody deducting from salary it's illegal.
From India, Bangalore
To my knowledge NO DEDUCTION from salary of employees being effected by any employer. This component is only shown/included in the CTC to the extent of eligibility every year to project the sum of annual cost of every employee to the Co on accrual basis. Neither gratuity is payable on monthly basis nor annual basis like salary. If somebody deducting from salary it's illegal.
From India, Bangalore
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Is't illegal if any employer choose to pay gratuity to employees even if they didn't complete 5 yrs.of continuous service ? I think it's not so. Definitely there is NO BAR. It would be fair enough and appreciate if some employer pay gratuity for <5 yrs. of service as mentioned. Of course claiming deduction under IT act is a different matter.
From India, Bangalore
Is't illegal if any employer choose to pay gratuity to employees even if they didn't complete 5 yrs.of continuous service ? I think it's not so. Definitely there is NO BAR. It would be fair enough and appreciate if some employer pay gratuity for <5 yrs. of service as mentioned. Of course claiming deduction under IT act is a different matter.
From India, Bangalore
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I won't/never say the employer violates the law if they don't pay gratuity to those leaving in <5 yrs. as it's not legally payable. But when in CTC situation an employee is given to understand that he earns gratuity every year but not paid to him/her either monthly or annually or even at the time of leaving. Thus meaning, where does the money gone if not paid ? Further, the very same employer either remits to the LIC or any other underwriters who administer their gratuity scheme the amount periodically or make a provision in their A/cs every year under the Head "Retirement Benefits/Cost to Employees" (either actuarial basis as certified by an Actuary or any other method being followed in respect of gratuity provisions as per Accounting Standard-15) together with
(a) Provident fund
(b) Superannuation/pension
(c) Gratuity
(d) Leave encashment benefit on retirement
(e) Post-retirement health and welfare schemes
(f) Other retirement benefits.
I only wish to make a distinction among the employers, one who follows CTC and others conventional Pay package limiting to basic,DA and other allowances paid monthly. In non CTC group employees, except those curious lot, one does not even know what is gratuity, how much and when they'll be paid as theirs' not inflated with gratuity component. So he/she leaves with not much to bother. Whereas a CTC employee leaves without gratuity payment, he/she knows very much how much they lose, roughly 2 1/2 months salary, which hurts. This money is retained by the employer !. ?? Of course this is not illegal either. But we feel the difference in these concepts.
From India, Bangalore
I won't/never say the employer violates the law if they don't pay gratuity to those leaving in <5 yrs. as it's not legally payable. But when in CTC situation an employee is given to understand that he earns gratuity every year but not paid to him/her either monthly or annually or even at the time of leaving. Thus meaning, where does the money gone if not paid ? Further, the very same employer either remits to the LIC or any other underwriters who administer their gratuity scheme the amount periodically or make a provision in their A/cs every year under the Head "Retirement Benefits/Cost to Employees" (either actuarial basis as certified by an Actuary or any other method being followed in respect of gratuity provisions as per Accounting Standard-15) together with
(a) Provident fund
(b) Superannuation/pension
(c) Gratuity
(d) Leave encashment benefit on retirement
(e) Post-retirement health and welfare schemes
(f) Other retirement benefits.
I only wish to make a distinction among the employers, one who follows CTC and others conventional Pay package limiting to basic,DA and other allowances paid monthly. In non CTC group employees, except those curious lot, one does not even know what is gratuity, how much and when they'll be paid as theirs' not inflated with gratuity component. So he/she leaves with not much to bother. Whereas a CTC employee leaves without gratuity payment, he/she knows very much how much they lose, roughly 2 1/2 months salary, which hurts. This money is retained by the employer !. ?? Of course this is not illegal either. But we feel the difference in these concepts.
From India, Bangalore
There is no law which bans the employer to pay anything before the completion of the period or in other words more than that is mentioned in the law.
The only difference, is how can you legally say, that the employer needs to pay the same compulsorily? There are many employer who go by the law. So the payment of Gratuity to be paid before 5 years is completely an individual companies decision.
The law says that it must be paid on continuous completion of the 5 years of service.
Also, no law says, that what is said in the CTC, needs to be paid. As if that was the case, so many employers put performance pay in the CTC and pay only as per the calculation (the actual amt. paid is much low), so then similarly like Gratuity, the employers needs to pay the PP as what is mentioned in the CTC and not otherwise.
Difference of Opinion will be there, as it is just how the company looks at the bottom line.
Regards,
Ashutosh Thakre
From India, Mumbai
The only difference, is how can you legally say, that the employer needs to pay the same compulsorily? There are many employer who go by the law. So the payment of Gratuity to be paid before 5 years is completely an individual companies decision.
The law says that it must be paid on continuous completion of the 5 years of service.
Also, no law says, that what is said in the CTC, needs to be paid. As if that was the case, so many employers put performance pay in the CTC and pay only as per the calculation (the actual amt. paid is much low), so then similarly like Gratuity, the employers needs to pay the PP as what is mentioned in the CTC and not otherwise.
Difference of Opinion will be there, as it is just how the company looks at the bottom line.
Regards,
Ashutosh Thakre
From India, Mumbai
Dear Shri Bhat,
Appointment letter cannot supercede the provisions of law of the land. If you or any aggrieved employee believes that the gratuity element, if included in the appointment letter, can well approach the competent court of law even for experiment sake and should get a landmark judgment, if the courts agree that the appointment letter can supercede the provisions of law. If that happens, that can also prove benficial to other employees in the industry.
From India, Delhi
Appointment letter cannot supercede the provisions of law of the land. If you or any aggrieved employee believes that the gratuity element, if included in the appointment letter, can well approach the competent court of law even for experiment sake and should get a landmark judgment, if the courts agree that the appointment letter can supercede the provisions of law. If that happens, that can also prove benficial to other employees in the industry.
From India, Delhi
Hi Sanjeev, Thanks to raise the question in detail , i am also in confusion on this point while offering in CTC Concept. requesting you other senior members to clarify on this .
From India, Hyderabad
From India, Hyderabad
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No doubt, certainly it's payable when once the reappointed/reengaged "employee" has put in a minimum of 5 yrs of continuous service on this fresh appointment based on his new salary (last pay drawn on leaving).
From India, Bangalore
No doubt, certainly it's payable when once the reappointed/reengaged "employee" has put in a minimum of 5 yrs of continuous service on this fresh appointment based on his new salary (last pay drawn on leaving).
From India, Bangalore
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc