Whether Gratuity is part of CTC?


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. Section 3 of the Payment of Gratuity Act, 1972 provides for a ÔControlling AuthorityÕ.

Different areas have different controlling authorities that ensure the effective administration of this act. The act gives the controlling authority the status of a Ôquasi-judicialÕ 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 ÔOÕ 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 employeeÕs 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 ÔRÕ. 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 employeeÕs 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. Gratuity is not included in the CTC because it has a time bar.

Therefore, we do not think it should be part of the CTC, although the attrition rate in our organisation Ð where gratuity is not a part of an employeeÕs CTC Ð is negligible. However, if an organisation is willing to pay gratuity without any conditions on the minimum years of service, it can be included in the CTC.

Reference: Section 4 of Payment of Gratuity Act, 1972



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