Clarification on gratuity paid by employer after 5 years of service

675 votes

dear reader

kindly provide us the information regarding the nature of your work, how your employees are recruited and what all are deducted from the monthly salary before salary paid to your employees. after consider all the answers i will be in a position to provide you an appropriate legal opinion.

Advocate Divesh Sharma LawRato

785 votes

Apparently you seem to have a good case. Valuable advice of learned experts/members is sought. Before you initiate any action, kindly show all records to a competent and experienced service lawyer and draw a strategy. If the company is caught on wrong foot to evade severity of punishment and penalty(ies) company may reply that even if the employee leaves before 5 years the amount collected from employee shall be refunded with interest, however this approach can be termed grossly wrong, illegal. It entirely depends upon your decision and resolve what do you want to do with this employer. The correct in practices and conduct of this employer shall help many other fellow employees in this company and industry. You can lodge a complaint with controlling authority which can be ALC/DLC with a copy to O/o labor commissioner. You may give an opportunity to employer by submitting a gentle communication to good offices of your appointing authority, MD, Company Secretary with a copy to Head-HR, and persist for a reply in writing only even if by email, and may proceed after the reply. Gratuity is a statutory right of employee whoever completes 5 years in the same organization, and is a terminal benefit. The cost is to be born by employer and not employee. Gratuity can not be a part of CTC. If company is making it part of CTC you can agitate before the controlling authority. Or even legal notice from one ( common ) lawyer of all employees to company might be sufficient to drill sense into it and to get the entire payment released. It may be treated as minor fraud. However you shall be eligible to get the amount even if you have not completed 5 years. The amount paid by company to Group Gratuity Insurance Scheme is accumulated and LIC pays interest on it. This fund is created so as to meet the payment of gratuity to employees in case of death, disability. If this fund is not created company has to bear the cost from its own resources. Moreover in case of termination/resignation of eligible employee the payment is made from the fund and rest is carried forward and keeps on earning interest. Moreover after 5 years company shall make a payment as per formulae of the gratuity, while if you consider the monthly contributions (shown as part of CTC or collected from employee) the amount shall be more than amount calculated by gratuity formulae. The companies which make gratuity as part of CTC pay the amount as Tax rebated/Ex. Gracia in FNF settlement even if employee leaves before 5 years ( or 4Y8M/ 6M as the case may be). For also further more details visit and post ur query at www.advocateprateekk.wordpress.com

Advocate Prateek Khandelwal LawRato

617 votes

My dear friend , it is mandatory to pay gratuity to employee as provision of the payment of gratuity act if the establishment covered under the gratuity act. Calculation will be on last drawn salary and service rendered years.

Advocate Prem Dayal Bohra LawRato