Gratuity is considered as part of CTC by employers because they either make a provision for payment of Gratuity or contribute to Gratuity fund.
It’s not mandatory for employers to maintain a Gratuity fund. It’s optional.
Your employer can opt to pay Gratuity to employees directly.
The only advantage of maintaining a Gratuity fund is that if you pay a marginal risk premium, Gratuity is paid by the insurance company in the event the employee dies while in employment considering the service from his Date of Joining till the date he/she would have superannuated from service if he/ she had been alive.
Normally, if the employer pays Gratuity directly it will be restricted from the employee's Date of Joining till his date of death.
Please remember that the insurance companies pay Gratuity only from the fund contributed by you each year. So, if the Gratuity payable is greater than the fund maintained by you, the insurance companies will deny payment of Gratuity. For this purpose, the insurance company computes an actuarial valuation every year and advises the employer to top up the fund to ensure Gratuity payments to all employees without any hassle.
Copy link to clipboard