Avail the Gratuity Money it’s your Legal Right!

Narendra Kumar

17 Jun, 2019

What is the Gratuity?

• Gratuity has been introduced in the lieu of paying and in the form of benefit plan given by the employer to the employee for staying with the company and restoring the faith in the company for a continuous period of 5 years or more which is good enough to be appreciated.
• It is paid to employees who are rendering services continuously for five years or more.

It is usually given in monetary terms at the time of retirement. However, pursuant to certain rules of the by the Payment of gratuity act 1972, an employee eligible to receive gratuity before the age of retirement or superannuation.

Formula for Gratuity:

The last drawn salary * 15/26 * number of years of service rendered

Note following:

• “*” denotes multiplication and “/” represents Division.
• 15 represents the salary to be considered is per month.
• 26 represent the Number of working days in a month (irrespective of 5 day work week or 6 days work week)
• In case of the daily wage of laborers, gratuity is calculated as Average Wage * 15 * Tenure
• Average Wage –means and include the daily wage of the laborer for the last 90 days.

Applicability and Employers liable to Pay Gratuity:

Gratuity is governed by the Payment of gratuity act 1972, the act is applicable to the following, set up/business/enterprise employer’s who are employing more than 10 workmen:

1. Factories,
2. Mines,
3. Oil fields,
4. Plantations,
5. Ports,
6. Railways,
7. Motor transport undertakings,
8. Companies, and
9. Shops and other establishments,

When is it Payable to an Employee by the Employer?

1. On his superannuation,
2. On his retirement
3. Resignation after completion continuous period of 5 years

Note: However in case of Death, of the accident, or Long disease, it is paid before irrespective of the continuous period requirement for the company.

To whom it is Payable?

1. to the employee itself who has rendered the services.
2. However in case of the death of the Employee, to his nominee, on the production of evidence of being the nominee, if asked by the issuing authority

Note:  If the Nominee is a minor, in that case, the Assistant labor commissioner shall deposit the money and invest it with a nationalized bank or State bank of India (SBI).

Terms to be Clearly understood to avail Gratuity:

1. Continuous period:

Relaxation in counting continuous period as given below:

Let’s understand this 240 day makes a year in 6 days working company, however in 5 days working organization 190 days makes one year, in such a case a person shall be eligible for 5 years continuous period although in actuality it is 4 years 190 days only.

Relaxation considered is like if an employee works for 4 years and 11 months, the employee will be eligible for gratuity.  On the other hand, if the employee has worked for 4 years and 5 months, it is treated as less than 5 years and no gratuity will be paid.

Continuous service has been defined as uninterrupted service. But, it shall not include the following:

1. interruption due to leave,
2. sickness or
3. accident
4. The strike,
5. lay-off, or
6. a lockout
7. Any such interruption which is not due to the fault of the employee,

2. Salary means and includes only two components that are Basic plus Dearness allowance plus Commission:

Procedure to apply for Gratuity:

There are two cases as given below:

1. When an application is made by the employee itself.
2. When the nominee makes the application.

1. When an application is made by the employee itself.

• The application is required to be made to the employer from 30 days it has become due, and in case of retirement or superannuation, it can be made even before 30 days.
• The employer is required to give a reply within 15 days of an application made; in reply, he shall let the employee know the amount of gratuity, when it will be paid and such related details for the gratuity.
• The application is made in Form I.
• Mode of payment: Cash/cheque /DD.

2. When the nominee makes the application

On application being made by the nominee, certain evidence of being nominee can be sought; the date for the reply of same by the employer shall be counted from the date of acceptance of the evidence or claims made by the employer.

Grievance:

In case of any complaint or grievance, a complaint can be filed with the assistant labor commissioner within 90 days of such event.

Application to be made in Form N

Forfeiture:

In certain cases, the gratuity can be forfeited let’s say where the employee’s services have been terminated due to his misconduct or negligence which has caused damage to the employer.

However, even if the company becomes bank corrupt, it can’t deny the right of gratuity to the eligible employee, i.e. even in that case, the gratuity amount cannot be attached by the court.