Hello HRians, We all know that Payment of Gratuity is a mandate for any organization. Can you suggest any solution so a company can plan better in advance? Like, indirectly deducting it from employee's monthly pay or include it in CTC offered at the time of joining? Or if there is any other such way out which is legal and fair?

@Rohan Mankad?

you can look at group gratuity fund plans from HDFC< LIC, ICICI

Hey Nirav, while adding the gratuity amount to the CTC is the most followed route it is not a preferred one in my opinion - it just reduces in hand and if the employee leaves without completing 5 years it becomes a problem. I wouldn't recommend deduction from their monthly in hand towards gratuity, in this case employee has every right to ask this amount back if they leave. A simple way could be what Sai said setup a gratuity fund if you don't want to do it with a bank, can do it internally in the company - gratuity becomes a planned expense in case of retirement or seniority. You can also start contributing early.

We had the provision of actuarial calculation for gratuity since day 1. Finance team booked the amount (saved it somewhere it could get interest on) but did not put in any funds.

@Sai Venkata Vinay Chittuluru - Can you help me with more info. that what are these plans and whom to approach? @Rohan Mankad - Thanks a lot.

@Nirav Shah It is best for you to consult your company's CA or the company that is handling the accounts for you. Because the trust fund may not be the option if the company is small in size and the gratuity fund from a vendor is similar to mutual funds which can be used after a decade as interest must pile up and regular investments are needed in the plan which is 8.33% of the basic salaries every year, which is shown in many companies CTC These deductions go into gratuity fund every year. Another way is to calculate a set amount every year and put them in the bank as a corporate investment option some are that is Fixed deposit or recurring deposit or PPF which can be withdrawn when needed. Depending on the buyout/buy-in from your employer, HiPPOs (Highest Paid Person's Opinion, Highest Paid Person in the Office), CA, choose the best option. Also if the company is a stable company where employees stay longer than 4 years (attrition rate), and/or you are located in non-popular cities, then people stay longer in the companies as they are close to families, local or have no option to find better opportunities in the city. then the gratuity amount will be very high when a person is leaving the company. and/or tenure of the employees, if the employees have been in the company for more than five years and the count is bigger also the salary bracket is bigger, then have for example, my CTS is 50 Lakhs per year and leaving the company after working for 10+ years then my gratuity payment will depend on the last drawn salary per month will around 3.5 L, then you have pay around 26 Lakhs as part of Full and final settlement. So calculate the risks and opportunities based on the best decision opted by HiPPOs. Hope this helps

@Sai Venkata Vinay Chittuluru - Really appreciate your time in detailing this. Many thanks.