Our company is planning to implement LIC's group gratuity scheme. As it will be affect the employee cost, the management is thinking to include the gratuity component in employees CTC (since it will be added benefit to the employee).
Now my queries are as follows: - Is the management's decision of including gratuity in CTC is legally correct?
- How to include gratuity in CTC? i.e. at what %age?
- If after including gratuity component in employees CTC, any employee leaves the company before completing 5 years of continues service then he will not be eligible for gratuity claim. Then in that case how to compensate the employee for the gratuity portion deducted from his salary over the period of his employment with the company?
19 January 2011
Nowhere in the law, it has been mentioned that gratuity can not include in CTC.
Generally Emplyer should not include Gratuity in CTC as gratuity is payable to emplyee only after 5 years of service. If any employee leaves before, he is not entitled for gratity.
But now-a days many emplyer include gratuity in CTc as employer has to pay every year to LIC towards gratity of employee. Amount to be paid is calculated on the basis of Acturial Valuation done by LIC.
But I think it's difficult to get the acturial valuation for each new employee at the time up of his joining the company. In such a case can we use any formula. For eg. a fix % age on basic salary or like that.
As you mentioned that if a employee left the organization before completing 5 years of continues service, then how to compensate the amount shown as part of employees CTC and never paid to him as he left the company before completing 5 years.
CAclubindia
