What is the standard practice for Gratuity - 1. Is it deducted from CTC or not? 2. Also, like PF, do employees have an option to opt out of Gratuity?

1. Some companies include Gratuity (4.86% of basic) monthly in the CTC, however I would not advice you to do this as CTC is a cost to company and gratuity is only payable if an employee stays with the company for 5 continuous years so how can we show a cost to company when it is payable only after 5 years? That too with a condition and an assumption that employee will stay with the company. If you still are including it in the CTC what will happen to the funds you have collected from the employee if the leave in 4.5 years? They have all the right to ask it back since it is a deduction from the CTC and CTC was agreed in the employee contract. 2. No, why would an employee want to opt out? It is a big benefit plus a statutory payment given to an employee all they have to do is give 5 years of continuous service.

Makes sense, thanks @Rohan Mankad

@Prakhar Hey. 1. Gratuity is not deducted from CTC as it is a retrial benefit provided by the company as per the Gratuity Act. 2. No employee can opt out from Gratuity. As per the Gratuity Act, once an organisation has 10 FTE gratuity is a mandate for the employer and employee.

What if we havent provided gratuity at all. How do we set it up at the end of the 4+ years?

As Wristy stated Gratuity is mandatory once you have 10 full time employees working on your rolls. You can refer to https://vakilsearch.com/blog/15-26-in-gratuity-calculation/#:~:text=%7Bbasic%20salary%20dearness%20allowance%20%2F26,basic%20income%20DA%20by%2026. as well for more details