1. Is it mandatory to include the gratuity in the employee’s Cost to Company (CTC)?
As Payment of Gratuity Act ,1972 does not specifically require employers to include gratuity in the Cost to Company (CTC) package. It is not mandatory, but most companies include gratuity in the CTC as it is the employer’s liability towards the employee if employee works for the company for more than five years.
2. Whether there is any limit of gratuity that is been given to the employee?
Under Section 4(3) of The Payment of Gratuity Act, 1972 the gratuity amount payable to an employee shall not exceed the limit specified by the Central Government from time to time. According to the latest notification S.O. 1420 (E) dated 29.03.2018, and in exercise of the powers conferred by the Central Government specifies that the gratuity amount payable to an employee shall not exceed twenty lakh rupees.
3. Is it mandatory to provide gratuity to employee by the employer?
According to Section 1C of The Payment of Gratuity Act, 1972 establishments or classes of establishments with ten or more employees, either currently or at any time during the preceding twelve months, are covered under this Act. It is mandatory to provide gratuity to every employee who has completed five years of continuous service, as per Section 4(1).
4. In case an employee has been transferred between the sister companies. How the employee’s gratuity would be treated?
Under Section 4 of the Payment of Gratuity Act, 1972 gratuity is payable to an employee upon the termination of their employment, provided they have completed at least five years of continuous service. Gratuity is payable in the following circumstances:
- On superannuation.
- On retirement or resignation.
- On death or disablement due to an accident or disease.
Gratuity is not payable upon transfer. However, if an employee is transferred between sister concerns or subsidiary companies under the same employer, and the conditions of service allow for such transfers, the proportionate contribution of gratuity can be transferred. While there is no specific government order on this matter, the government does not object to the transfer of the proportionate share of gratuity between companies within the same group.