reply-private school teachers arenow eligible for payment of grati uty
My wife had recently resigned her job as a teacher in a private w.e.f 1st april1997.those teachers who have not received they should request to school management to pay gratiuty as per amenmendmade in gratiuty act2009.if not given positive response aproach to labour court for direction to school management as per provision made by adding sec13a inactas well amending definition pf employee for payment of gratiuty purpose.
Can somebody guide, for the benefit of all teachers, on the following points - with relevant authority that can be referred to either in a book, internet or through an attachement in this forum.?
1. Are teachers of Pvt unaided Schools, entitled to Gratuity ?
2. HC Ahemadabad had issued some order on the "employee" status of teachers due to which they were excluded from the provisions of Gratuity. What were the salient features of this order?
3. Later, SC had stayed this order pending Parliamentary discussion on the subject to make Gratuity applicable to all teachers. When was this and what is the reference of this order. Can it be referred to and can somebody post the relevant stay order on this forum.
Needless to say, virtually all Private School Teachers are lacking adequate and concrete knowledge of rule position on this important aspect. A discussion on this subject would greatly benefit all of them.[/QUO
27th May 2010 From India, Bhopal
We too are rather confused about whether Gratuity is applicable to Teachers in Gujarat or not.
Through the posts in this forum I understand it is applicable to Non Teaching staff inclusive of Computer Teachers, Librarians and the Heads, Coordinators etc who work for the same no. of hours as Non Teaching staff.
Can someone please update us with the latest Act / ruling or is it still an impasse ?
Do schools have to cater for Gratuity for Teachers or not?
7th September 2018 From India, Vadodara
I work as an HR of an Private unaided school and have been doing multiple rounds of labour court in the past few years regarding Gratuity to teachers. Recently the Govt of India has amended the Gratuity act w.e.f from 6th May 2016 i.e. the teachers retiring after the said date will be ineligible for gratuity.
Please refer the Repealing and amending act of 2016, where Gratuity to teachers have been completely repealed as a whole (amended).
I am attaching the complete guide which states that teachers were entitled for gratuity who retired or quit jobs between 3rd April 1997 to 6th May 2016.
Ref Courtesy: Excelsis Advisors
16th November 2018 From India, Mumbai
What is Gratuity?
When an employee leaves the service, employer rewards him for his accrued service in the organization. He does so by giving you a free lump sum of cash - called gratuity in financial parlance - on your exit. The amount that employer gives is based on the number of years of service employee have put into the organization.
As per Gazette notification issued by Ministry of Law & Justice in The Gazette of India on dated 29th March 2018 as applicable WEF same date amends the Ceiling Limit from "ten lakh rupees" to "such amount may be notified by the Central Government from time to time" is substituted. On 29.03.2018 , it is ceiling limit is raised to 20 lacs from 10 lacs for Private Sector Employees.
When is Employee entitled to Gratuity?
Gratuity in earlier days was rather arbitrary and completely hostage to the whims of the employer. A wealthy, well-established employer would reward his dedicated employees and the not so rich would refuse such generosities. This led to a lot of discord and finally, the government stepped in, passing the Payment of Gratuity Act, 1972, making it mandatory for all employers with more than 10 employees to give them the gratuity. Employees, as defined here, are the ones hired on company payrolls. Trainees are not eligible and gratuity is paid on the basis of the employee's basic plus dearness allowance if any.
How much can an employee get?
The employee becomes entitled to a gratuity on resignation or on retirement after five years# or more of service. As per the Act, the gratuity amount is 15 days' wages multiplied by the number of years put in by you. Here wage means your basic plus dearness allowance. Take the monthly salary drawn by you last (basic plus dearness allowance) on resignation or retirement and divide it by 26, assuming there are four Sundays in a month. This is your daily salary. Multiply this amount by 15 days and further with the number of years you have put into service.
History of amendments to Gratuity Act?
Gratuity benefit is usually payable at the time of retirement. Since at the time of retirement employee generally has no source of regular income and due to old age- increasing medical expenses and increasing inflation to meet with day to day expenses. So to cope up with all these uncertainties, Gratuity Payment becomes a financial support to meet necessary expense as a single one-time payment. The rules and regulations being prescribed in Gratuity Act 1972 need to be amended time to time and Labour Ministry tries to provide full justice by making amendments to the above act, in the national Parliament. Some of the amendments in the Payment of Gratuity Act 1972 are as follows:-
The first amendment made by the Payment of Gratuity (Amendment) Act, 1984 inter alia provides for raising the wage limit for coverage from Rs 1000/- to Rs 1600/- per month and appointment of Inspectors.
The second amendment made by the Payment of Gratuity (Second Amendment) Act, 1984 inter alia re-defined the term ‘continuous service’ and provided for the grant of exemption to a class of employees from the operation of the Act.
The third amendment made by the Payment of Gratuity (Amendment) Act, 1987 inter alia provided for:-
(a) Raising the wage limit for coverage from Rs 1,600/- to Rs 2,500/- per month, which was further raised to Rs 3,500/- p.m. .
(b) Replacing the ceiling of twenty month’s wages for payment of gratuity by a monetary ceiling of Rs 50,000/-
(c) Making it obligatory for the employers to pay simple interest at a specified rate if the gratuity is not paid within 30 days from the date it falls due.
(d) Compulsory insurance/setting of gratuity fund for payment of gratuity.
In later amendments, wage limit was removed altogether and ceiling limit was revised from time to time. Ceiling limit was raised to Rs 100,000 from Rs 50,000 in 1994 and further raised to Rs. 3,50,000 in 1997. It was increased to Rs. 10,00,000 in 2010 and As per Gazette notification issued by Ministry of Law & Justice in The Gazette of India on dated 29th March 2018 as applicable WEF same date amends the Ceiling Limit from "ten lakh rupees" to "such amount may be notified by the Central Government from time to time" is substituted.
Why is Creation of Group Gratuity Trust Fund Beneficial for Employer?
Normally Group Gratuity funds of the trust can either be invested by the trustees or alternatively the funds may be let out to LIC who will then invest & give a specified return on the trust fund. The administrative work of the trust, however, is the responsibility of the trustees. Companies prefer to create LIC managed Trust Fund to focus on their core business.
In case of LIC managed funds of the trust, companies will get following benefits:-
(i) The job of investment and interest is paid by the Corporation on the accumulated funds.
(ii) In case of death while in service, the service period is counted while calculating the gratuity as if the person has served the company up to his Normal Retirement Date.
(iii) LIC maintains the fund under the name of the trust.
(iv) Investment of funds is taken care by LIC & Interest is declared as per the performance of Total Fund and credited to the individual trust fund.
(v) At the time of exit of an employee, trustee send discharge and advice LIC to make payment of Gratuity as per Scheme to the Trust.
(vi) Tax benefits are as per the provisions of the Income Tax Act, 1961. Such as Contribution to LIC are treated as business expenses to the company and Interest earning are Tax-Free. (Tax laws are subject to change.)
The above tax benefit as stated in (vi) above is not available to the companies who make the accounting provision of Gratuity in their Balance Sheet as per the provisions of Accounting Standard-15 (Revised 2005) and IndAS 19.
In case you have any requirement for consultancy for creating Group Gratuity Trust Fund with Insurance Company, need any clarification on payment of Gratuity Act related issues or need PDf copies of official notifications for various past amendments, then you may contact me.
12th February 2019 From India, Delhi
2. How Schools should do their accounting is explained by The Institute of Chartered Accountants of India in a guidance note GN(A) 21 (Issued 2005) Guidance Note on Accounting by Schools, here in after referred to as GN (A) 21.
3. In para 4 of the GN (A) 21 it is stated that “This Guidance Note is applicable to all non-governmental schools whether Government aided or not, whether established by a trust or a society or by any other form of organization.”
4. In para 60 & a footnote thereto under section headed “Recognition Criteria for Items of Expenses” of the GN(A)21 it is recommended that as far as Accounting for Retirement Benefits in the Financial Statements of Employers is concerned , principles laid down in “Accounting Standard (AS) 15 (Revised 2005) – Employee Benefits” should be followed.
5. Gratuity being an important retirement benefit to employees in the Indian context, is relevant for Schools (with reference to para 1 above). Since an employee sacrifices prime time of his life for the development, prosperity and betterment of his employer, employer pays his employee gratuity as a graciousness or gift to him, when he no longer serves him.
6. Without going into details of the AS – 15 (Revised 2005), we have to say that accounting for Gratuity Benefit is to be made in accordance with this Standard. Brief details about Gratuity benefit and how accounting for the same in compliance of AS 15 (Revised 2005) is to be done are given in para 7 & in subsequent paras herein below.
7. Gratuity Benefit falls in the category of “Defined Benefits” & amount of Gratuity payable to an employee on his exit from service, according to “ Payment of Gratuity Act 1972”, in force at present, is :-
(Salary of the employee at the time of exit) x (15/26) x (Number of Years of Service at the time of exit)
This is subject to a ceiling limit of `20,00,000/-
Gratuity is payable to an employee on exit from service after he has rendered continuous service for not less than five years:
(a) On his superannuation
(b) On his resignation
(c) On his death or disablement due to employment injury or disease.
In case of (c) vesting condition of 5 years does not apply.
Since this benefit depends upon last drawn monthly salary and is linked to length of service, normally it goes on increasing from the time when the employee joins service and the time of his exit from service due to annual increase in salary and increasing service period.
8. Figures required to be shown in the Financial Statements i.e, Balance Sheet and Income & Expenditure Account for compliance of AS 15 (Revised 2005) are:-
(a) Value of Obligation both at the beginning & close of the financial period.
(b) Interest Cost
(c) Current Service Cost
(d) Actuarial Gain/Loss
(e) Actuarial Gain/Loss due to experience Adjustment
(f) Employer’s Expense
9. Determination of the above figures involves a complex exercise. Most Scientific way to determine these figures falls in the discipline of Actuarial Science & it is advisable to seek the services of an Actuary for this purpose.
10. Information/ Data to determine the figures for items mentioned in para 8 above are broadly as follows:-
(a) Data of employees, both at the beginning & close of the accounting period, in excel version, with particulars:-
(i) Serial number
(iii) Date of birth (mm/dd/yyyy)
(iv) Date of joining Service (mm/dd/yyyy)
(v) Qualifying Salary for the purpose of Gratuity
(vi) Retirement Age
(b) Assumptions with respect to the following rates:-
(i) Salary Escalation rate which includes inflation, merit and promotional increase.
(ii) Attrition rate
(iii) Discount rate (As per para 78 of AS 15 (Revised 2005))
(iv) Mortality and disablement rate. (Normally it is Indian Assured Lives Mortality–2006-08) ult.
11. In case you require us to provide you a report under your gratuity plan in compliance of AS 15 (revised 2005), we will be happy to provide you our services (Terms and Conditions will apply). These services are provided by Actuaries having experience of several decades in this special area. We have necessary infrastructure and a very efficient team of personnel equipped with the expertise – statistical, actuarial and analytical, essential to meet the requirements of AS 15 (revised 2005).
12. We may be contacted at +91-9211637063
29th August 2019 From India, Delhi