Soical Compliance Auditing
Manager - Hr (generalist)
Advocate - Labour & Industrial Law
K C S Kutty
Labour Laws
Asst. General Manager - Hr
Human Resource
+2 Others

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hi.. i am a student and i need this answer urgently: in a factory all the workers are above 42 years and the factory didn't initially start giving the factory wants to give gratuity in a cost saving suggest.. if possible with relevant case laws
From India, Bhubaneswar
Dear Dalia
In your post you have not mentioned whether the employees in the factory has served for more than 5 years continuously. secondly the Payment of Gratuity Act applies to the fcatory employing more than 10 employees. does your factory comes undert he ambit or not.
Secondly please make your query more detailed.

From India, Ludhiana
Payment of Gratuity Act 1972 is applicable to every factory where 10 or persons were employed on any day of the preceeding 12 months.
Age of employees are not very important.
Every employees, who has rendered continious service of not less than five years are eligible for gratuity.
There is no economic way os gratuity. YOu have to pay as per eligibility.

From India, Madras
Hi,you can go thru any of the option like gratuity investment in LIC, or say any bank like Kotak Mahindra Bank, in this case particularly they will invest your money and in coming time you have to contribute less as the fund grows and u dont have to pay as high earlier you were doing this.Let me know if any query is there..regards,Ketan kokilAXIS Bank Ltd+919827710911
From India
You need to understand first the applicabliltiy of the Payment of Gratuity Act and if your organisation is covered by the legislation, you need to estimate the acturial value of the gratuity amount payable. This figure should necessarily be part of the balance sheet of your organisation. To safeguard the interest of the employee on separation /retirement and the employer of financial burdens, it is preferable that your organisation takes a group gratuity insurance policy from LIC / other reputed insurance firms.

As a cost saving technique, some companies will show gratuity amount as separate component from his(Ee) ctc and will pay at the time of resignation/retirement (If completed 5 years continuous servise). Incase of death of Ee, he will be eligible for gratuity irrespective of no of years of service.
It will reduce your labour turnover and act as a retaining technique. If any person leaves the company before 5 years you can save the amount which is shown separate component from his salary.
Actually it is not fair but most of the companies are following the same.:)

From India, Warangal
Amount of Gratuity Payable is calculated by a simple arithmatic formula. It is payable to eligible employees only at the time of seperation (resignation, retirement, death, termination).Hence there is no possibility of any cost saving at all in payment of gratuity. You have to bear your legal liability.
Thanks & Regards

From India, Pune
Dear Dalia,
You can go for good option which is currently running by LIC.The number of average employees present in your company ,please take gratuity policy of LIC of fixed number of employees and submit monthly installments ,really this will help to minimize costing of your organisation.
Your organisation will be free at the time of gratuity given to the eligible employees.
If you could not find the ageny/LIC policy at your area,please send me request letter then i will provide you complete details on this.
Note: If period of employee stays is very short (1 or 2 years)then you should not go for this policy,but if your management feel about the employee welfare and reduce the company bearing cost then you should go for this policy.
Best Regards
Sajid Ansari

From India, Delhi
Suggestion of Mr. Rajendra of deducting amounts from salaries of employees as a contribution for gratuity does not go with the spirit and provisions of law. This may even attract penalty. Gratuity is to be borne entirely by employer and there is no provision of employee contribution in law.
Thanks & Regards

From India, Pune
thanks to all of you.. actually i am a student and i have to give these options to a corporate house so that they let me go through a project work under them. it was a difficult question for me as i had no idea about gratuity act.. thanks to all of u...
From India, Bhubaneswar

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