Hi all!!
What is CTC?
If i were to include Gratuity in CTC, is not required to be given to employee, if he was to resign by the end 3rd year?
Will the employer account this as his income on resignation of emloyee, as he was already expenses it?
Indicating that so much of Gratuity is payable if emloyee were to wor for 5 years (Approx) is fine.
Gratuity is calculated on last salary drawn, how can anyone comute it before 5th year??
Gratuity is a statutory payment and all employers are required to pay it, if an employee complete required period of service, then how this changes comparision?
Best Regards,
From India, Bangalore
9What is CTC?
If i were to include Gratuity in CTC, is not required to be given to employee, if he was to resign by the end 3rd year?
Will the employer account this as his income on resignation of emloyee, as he was already expenses it?
Indicating that so much of Gratuity is payable if emloyee were to wor for 5 years (Approx) is fine.
Gratuity is calculated on last salary drawn, how can anyone comute it before 5th year??
Gratuity is a statutory payment and all employers are required to pay it, if an employee complete required period of service, then how this changes comparision?
Best Regards,
From India, Bangalore
I have read all the comments mentioned and some of them are useful and clear. CTC is cost to company. This is what a company has to spend on the particular employee. So now a days companies are showing it clearly to the prospective employee that this is what we will be spending on you. It is transperant and clear. Now coming to the point of statutory compliance, it is important that we all follow and that is the very reason it is shown clearly in CTC so that , it is clear and company is liable to pay only if the employee has completed 4 year 8 month and above,else its not to be paid.
These are all the best practices which all companies wish to follow and it is sucessful only with the combined effort of all the employees and management.
- Chakradhar Reddy.
From India, Hyderabad
These are all the best practices which all companies wish to follow and it is sucessful only with the combined effort of all the employees and management.
- Chakradhar Reddy.
From India, Hyderabad
My question is - Gratuity is only to be disclosed in the statement as part of CTC, but no accounting entries are to be passed till 4 years 8 months?
if yes, what entry is passed on completion of 4 year 8th month? All amounts including prior eriod expenses accounted in books?
How about accounting princiles, accrual policy, accounting standard compliances etc?
From India, Bangalore
if yes, what entry is passed on completion of 4 year 8th month? All amounts including prior eriod expenses accounted in books?
How about accounting princiles, accrual policy, accounting standard compliances etc?
From India, Bangalore
I strongly recommend this view. Now a days the term "CTC" is projected at a very high levels to attract innocent job seekers, particularly at the lower level, who are not aware of such sugar coated terms. The prospective job seekers should be taught to ask for what will be the take home pay, along with benefits like PF, ESI, travel reimbusements, canteens etc. T
From India, Pathanamthitta
From India, Pathanamthitta
Dear Nikhil Kambleji,
Simplest Definition of Gratuity - A sum of money paid to an employee as a reward in the form of money at the end of a period of employment for his past services given as a gratitude towards the services rendered.
Now to earn the gratuity according to the Gratuity Act, specifies that one gets to earn the gratuity only after completing 5 years of continuous service in any company, and this goes accrued into the employees account till the time he/she changes the job or is retired. In any case, the gratuity account has to be settled on the departure of the employee.
The calculation is half the basic salary (at the time of departure/quitting the company due to change of job or retiring) multiplied by the number of years of service
As Mr. Christopher has pointed out that it cannot be deducted from the Gross Salary but can be adjusted in CTC, and that's the practice that is followed by most IT Companies. I too strongly feel that this is not the right practice, and it should not be apportioned in CTC as a component, because logically it should be disbursed from the company of the employer. It is for this reason several companies have formed a 'trust' and the members of the trust work on a certain base amount that is set aside by the company to enable the gratuity disbursement. However, in recent times LIC has a group Gratuity Insurance, to which companies contribute a certain some of money as a premium. The base for operation too is that it should have a minimum of 100 members only then the policy can be made operational, as per the servicing viability of the insurance company.
What I have given here is the broad policy, if one is really interested, one can query on Google both on the Gratuity Act and also on the LIC's portal on specifics of the LIC's Group Gratuity Scheme.
Finally when you join a company and it apportions gratuity in your CTC, I'm afraid you have no option at all. You have to take it without dispute, else you can refuse to join that company. There is no alternative whatsoever.
From India, Hyderabad
Simplest Definition of Gratuity - A sum of money paid to an employee as a reward in the form of money at the end of a period of employment for his past services given as a gratitude towards the services rendered.
Now to earn the gratuity according to the Gratuity Act, specifies that one gets to earn the gratuity only after completing 5 years of continuous service in any company, and this goes accrued into the employees account till the time he/she changes the job or is retired. In any case, the gratuity account has to be settled on the departure of the employee.
The calculation is half the basic salary (at the time of departure/quitting the company due to change of job or retiring) multiplied by the number of years of service
As Mr. Christopher has pointed out that it cannot be deducted from the Gross Salary but can be adjusted in CTC, and that's the practice that is followed by most IT Companies. I too strongly feel that this is not the right practice, and it should not be apportioned in CTC as a component, because logically it should be disbursed from the company of the employer. It is for this reason several companies have formed a 'trust' and the members of the trust work on a certain base amount that is set aside by the company to enable the gratuity disbursement. However, in recent times LIC has a group Gratuity Insurance, to which companies contribute a certain some of money as a premium. The base for operation too is that it should have a minimum of 100 members only then the policy can be made operational, as per the servicing viability of the insurance company.
What I have given here is the broad policy, if one is really interested, one can query on Google both on the Gratuity Act and also on the LIC's portal on specifics of the LIC's Group Gratuity Scheme.
Finally when you join a company and it apportions gratuity in your CTC, I'm afraid you have no option at all. You have to take it without dispute, else you can refuse to join that company. There is no alternative whatsoever.
From India, Hyderabad
Dr Alam
The realities are quiet different from a text book situation.
Every company adds as many things as possible to CTC.
Many companies add training cost. Does it come to the employee ? No way. But its still added as a practice (check any CTC given in the MBA colleges)
Hongkong Bank used to add to the CTC discount on housing loan, which the employee cant get in any case till he works for 5 years
(not sure if the practice is still alive).
So CTC is made to look high so that the employees are attracted to it.
Any smart employee will ignore all those that he is not actually getting. In fact, employees mostly focus at take home amounts only.
Ofcourse, i would like to know from the original poster as to whether he was referring to the CTC or was he referring to what is appearing on his salary slip
From India, Mumbai
The realities are quiet different from a text book situation.
Every company adds as many things as possible to CTC.
Many companies add training cost. Does it come to the employee ? No way. But its still added as a practice (check any CTC given in the MBA colleges)
Hongkong Bank used to add to the CTC discount on housing loan, which the employee cant get in any case till he works for 5 years
(not sure if the practice is still alive).
So CTC is made to look high so that the employees are attracted to it.
Any smart employee will ignore all those that he is not actually getting. In fact, employees mostly focus at take home amounts only.
Ofcourse, i would like to know from the original poster as to whether he was referring to the CTC or was he referring to what is appearing on his salary slip
From India, Mumbai
Dear Mr N. Kamble,
The company is well within its right to show Gratuity as a component in CTC . Components like Gratuity, PF, Superannuation, Cost of Uniform, Canteen facility, Transport facility, Premium paid towards Mediclaim, Personal Accident Policy etc may be shown as a part of the employer's contribution to an employee. These components are generally negotiable.
Take care,
Sourav Mukherjee
From India, Bangalore
The company is well within its right to show Gratuity as a component in CTC . Components like Gratuity, PF, Superannuation, Cost of Uniform, Canteen facility, Transport facility, Premium paid towards Mediclaim, Personal Accident Policy etc may be shown as a part of the employer's contribution to an employee. These components are generally negotiable.
Take care,
Sourav Mukherjee
From India, Bangalore
Dear Sourav,
Gratuity becomes cost only after completion of minimum 4 year 10 month's service. There is no way one can negotiate gratuity component with employer. Even employer himself can calculate approximate gratuity only on 5th year. Thats why accounting standard adopts actuary valuations for making provisions. All other calculations are only wild assumptions.
I think, any component, by whatever name you call, once included as part of CTC, that is legally due and payable (directly or indirectly) to employee and has to be paid.
If gratuity is shown as part of CTC and emplyee resigns after, say, 2 years, will this componet payable to him???
Best Regards,
Divakar
From India, Bangalore
Gratuity becomes cost only after completion of minimum 4 year 10 month's service. There is no way one can negotiate gratuity component with employer. Even employer himself can calculate approximate gratuity only on 5th year. Thats why accounting standard adopts actuary valuations for making provisions. All other calculations are only wild assumptions.
I think, any component, by whatever name you call, once included as part of CTC, that is legally due and payable (directly or indirectly) to employee and has to be paid.
If gratuity is shown as part of CTC and emplyee resigns after, say, 2 years, will this componet payable to him???
Best Regards,
Divakar
From India, Bangalore
wrong practice gratuity can’t be deducted from employee salary, but it should be the part of CTC which determine the cost of an employee. Thanks & Regards, From, Sumit Kumar Saxena
From India, Ghaziabad
From India, Ghaziabad
agreed!
But if we do not know whether person will be staying in company for at least 5 years to avail gratuity, how the calculations goes for gratuity from the day one.
Sir, can you please explain on how companies calculate gratuity to add in ctc as employer contribution for an employee. Is it on pro-rata basis??
Thanks!
From India, New Delhi
But if we do not know whether person will be staying in company for at least 5 years to avail gratuity, how the calculations goes for gratuity from the day one.
Sir, can you please explain on how companies calculate gratuity to add in ctc as employer contribution for an employee. Is it on pro-rata basis??
Thanks!
From India, New Delhi
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