• Is gratuity & earned leave part of CTC (cost to company) by default

Dear Sir,

Is Gratuity & Earned Leave is part of CTC (Cost to Company) by default even its not mentioned in the break up of CTC. If not can I claim it legally from my employer (explain me the rules).

Myself working in Sunbeam Group as Accounts Manager.
Asked 4 years ago in Civil Law

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6 Answers

They do not form part of CTC.

Gratuity means “a gift or present, often in return for favours or services.” Gratuity is paid over and above the normal salary. It is paid in recognition of long and meritorious services, rendered by the employee. The Payment of Gratuity Act, 1972 has legally recognized the concept.

Under Section 4, payment of gratuity is mandatory. Gratuity shall be payable to an employee on termination of employment after he has rendered continuous service for not less than 5 years in a single organisation

Gratuity payable: Last month's salary / 26 (days) x 15 (days) x completed years of employment

Where to file the case:

Section 3 of the Payment of Gratuity Act, 1972 provides for a ‘Controlling Authority’. Different areas have different controlling authorities that ensure the effective administration of this act. The act gives the controlling authority the status of a ‘quasi-judicial’ body which implies that it is empowered to adjudicate disputes arising out of non-payment of gratuity.

The Controlling Authority may issue a notice in Form ‘O’ to both the applicant employee and the employer. The two parties will then have to appear before the authority on a specified date, time, and place, given in the notice.

If the employer fails to present himself or an authorized person before the authority, the authority may proceed to hear the case and determine the employee’s application ex parte.

If the employee fails to appear before the authority on the specified date, then the application will be disposed of.

The authority, on hearing the case and examining the facts may pass a direction and issue a notice to the employer if it is established that employee is entitled to gratuity. A notice is served to the employer in Form ‘R’.

Generally, an Assistant Labour Commissioner of a state is appointed as a controlling authority in a state with the hearing taking place in the office of the Labour Commissioner. If you have been denied gratuity payment by your employer, you can file a complaint under Section 8 of the act, against the company. The controlling authority, on hearing both sides, if satisfied with the employee’s stance, can direct the employer to pay the gratuity that is due along with the interest on it.

If an employer fails to pay gratuity amount along with interest 30 days after the controlling authority has directed it to do so, the appropriate government, be it Central Government or State Government, whoever is concerned with the employing organization, will authorize the controlling authority to start prosecution against the employer, within 15 days.

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Industrial dispute act offence gratuity and leave gratuity is governed by the Payment of Gratuity Act and it is compulsory and the part of the companies to pay the gratuity if anyone has completed 5 years of service and the paid leaves governed by the industrial dispute act as well as the company's policy which should not be ultra-vires to the industrial dispute act.

There is no compulsory provision of claiming the paid leaves but you can claim your gratuity amount if you have completed the stipulated time frame

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Employees Earn their Leave as per provisions of Factory Act and Employer have no right to make it as a part of CTC as it is earned by employee.

2) Gratuity is a statutory right of employee whoever completes 5 years in the same organization, and is a terminal benefit

It cannot be part of CTC

Ajay Sethi
Advocate, Mumbai
87899 Answers
6207 Consultations

5.0 on 5.0

Gratuity is a statutory right of employee whoever completes 5 years in the same organization, and is a terminal benefit.

The cost is to be born by employer and not employee.

Gratuity can not be a part of CTC. If company is making it part of CTC you can agitate before the controlling authority. Or even legal notice from one ( common ) lawyer of all employees to company might be sufficient to drill sense into it and to get the entire payment released.

However you shall be eligible to get the amount even if you have not completed 5 years.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

Dear Client,

Gratuity not part of ctc, as employee eligible for it after 5 years of job and not by appointment.

Earned leave is too a separate concept and not ctc.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

The gratuity and the encashment of earned leave may not form part of CTC.

In my opinion you are trying to put efforts in vain.

Gratuity becomes payable, if and only if, an employee completes FIVE years of continuous service with organization. If an employee leaves the organization within FIVE years of joining, he is not paid the Gratuity Amount, even though the amount has been deducted from his CTC and kept aside.

Gratuity is a real payment but is payable depending upon certain conditions, ie, continuous service of 5 years and the last drawn salary. If these conditions are mentioned, there is no illegality in including the amount in the CTC. But it is not to be deducted from the salary but is paid subject to the above mentioned conditions.

T Kalaiselvan
Advocate, Vellore
78057 Answers
1543 Consultations

5.0 on 5.0

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