19 February 2010
The CTC is a break up of various components of salary like basic salary, da, hra, lta, medical re-im, Company's contribution to pf, gratuity.
19 February 2010
Gratuity is to be payable by the Company only if the employee completes five years in the company. Once he completes five years, it becomes a liability of the company. But the company cannot provide the entire amount at the end of the fifth year. The fair practice is to either have a annual contribution towards the fund or make a provision in the books of accounts.
Irrespective of the fact whether the employee will complete five years with the company or not, the company is at liberty to include the gratuity portion in the CTC of the employee. This gratuity is not to be paid to the employee but is only shown in the CTC. This is to be paid only if the employee completes five years with the company and that too when he leaves the Company. If the employee leaves the company after ten years, then it is to be paid at that time.
If he leaves at the end of four years, the amount of gratuity that was shown under his CTC would be adjusted against the balance amount of provision to be made for other employees.
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