Kuljit Pal Singh
Legal Professional
Hrm, Recruitment, Training And Development,
Raj Kumar Hansdah
Shrm, Od, Hrd, Pms
Hiten Parekh
Hr - Pharmaceutical Industry
+2 Others

Hi Everybody,

I have always found the suggestions given by seniors and fellow members on Cite HR very useful in grasping the concepts of hrm in the practical sense.

Once again, I need your help in relation to a legal hrm issue. Could seniors please guide me regarding the 'Position of teachers under Payment of Gratuity Act 1972'? We are a leading private educational group employing 1000+ faculty members and at the time of formation of the group, the group policy w.r.t. gratuity was defined as:
"A member who leaves service of the Group on completion of at least 10 yrs of continuous service shall be eligible to payment of gratuity at the rate of half a month of pay last drawn for every completed yr of service subject to a max. of 15 months of pay".

As the requirement of yrs in service has been reduced to 5 yrs some time back and there is some confusion in relation to the position of teachers employed in pvt. educational institutes under 'Payment of Gratuity Act' , thus we felt the need to review our policy in the best interest of all stake-holders.

In relation to status of pvt. Institutes’ teachers under the the 'Payment of Gratuity Act ', I got hold on the following information :



The Payment of Gratuity Act, 1972 (the Act) provides for payment of gratuity to
employees employed in any establishment, factory, mine, oilfield, plantation, port, railway
company or shop employing 10 or more workers.
2.The Central Government had extended the provisions of the Act to the educational
institutions employing 10 or more persons vide this Ministry's notification No. S.O. 1080
dated 3rd April, 1997. The Hon'ble Supreme Court in its judgment dated 13th January, 2004,
in Ahmedabad Private Primary Teachers Association Vs Administrative Officer [AIR 2004
(SC) 1426] held that teachers are not entitled to gratuity under the Act, in view of the fact that
teachers do not answer description of "employee" who are "skilled", "semi-skilled" or
"unskilled". The Supreme Court observed that non-use of wide language similar to definition
of "employee" as is contained in section 2(f) of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952, reinforces the conclusion that teachers are not covered
in that definition. Para 26 of the said judgment reads as follows:—
"Our conclusion should not be misunderstood that teachers although engaged
in very noble profession of educating our young generation should not be given any
gratuity benefit. There are already in several States separate statutes, rules and
regulations granting gratuity benefits to teachers in educational institutions which
are more or less beneficial than the gratuity benefits provided under the Act. It is for
the Legislature to take cognizance of situation of such teachers in various
establishments where gratuity benefits are not available and think of a separate
legislation for them in this regard. That is the subject matter solely of the Legislature
to consider and decide.".
3. Keeping in view the observations of the Hon'ble Supreme Court, it is proposed to
widen the definition of "employee", in order to extend the benefits of gratuity to the teachers,
by amending the same.
4. The Bill seeks to achieve the above objects.
The Payment of Gratuity Act, 1972 (the Act) provides for payment of gratuity to
employees employed in any establishment, factory, mine, oilfield, plantation, port, railway
company or shop employing ten or more workers. The Bill amends the definition of "employee"
in section 2(e) of the Act so that teachers shall also be entitled for payment of gratuity.

However, in this context I also came across another article which reads as follows:

“There is another Bill which has been introduced in the House of People (Lok Sabha) i.e. ‘The Payment of Gratuity (Amendment) Bill, 2007’ in which the term "employee" has been defined as follows: "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of factory, mine, oilfield, plantation, port, railway company, shop or other establishment, to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity. But, till today, no headway has been made in bringing the new legislation.
The ridiculous thing is that though all the teachers discharge same duties, but only the teachers, who are covered under any special statutes, rules and regulations, will get gratuity benefits, especially govt. teachers and those come under Grant-in- aid. This is nothing but the violation of the Art.14 of the Constitution. A classification between unaided and aided teachers does not seem to be reasonable classification as they travel in the same boat for the same purpose. Here, another point to be noted is that members of non-teaching staff of an educational institution are entitled to the gratuity benefit, but teachers are excluded from the same, though, they are working in the same institution. Thus, the teachers working in purely private educational institutions, who are large in number in our country, will be deprived of this gratuity benefit unless these educational institutions extend this benefit to them also. Now, ball is in the court of legislatures. Thus, the attention of the legislature is invited to the matter raised in this judgement for an appropriate legislation. If they are really interested in protecting the teachers, they have to take necessary steps without delay to safeguard the interest of the teachers by bringing an amendment to the Act so as to include these aggrieved people.”

Looking at the information above, I am really confused about the applicability of this act to teachers in pvt. institutes .

Pls. guide me about :

1. What is the exact status of pvt. colleges' teachers under this act? Is this act uniformly applicable to both govt. & private sector teachers irrespective of their wages?

2. If we wish to extend the gratuity benefit to our teachers (even if its not compulsory under the act), then can we frame our own policy in this regard or strict conformation to Gratuity Act is required, because we would like to reach a solution that is acceptable to both the faculty and the top management?

3. Besides, is there any wage or basic pay limit for doling out gratuity benefits because again in this regard, I received very contradictory information, that is:

a.“The Act is not applicable to apprentices and persons holding a post under the Central or State government who are governed by any other rule providing for payment of gratuity.

The Act covers all employees who draw upto Rs. 3500 per month as wages. The maximum gratuity payable is Rs 3,50,000.”

b.“The Act enforces the payment of gratuity, as a statutory retiral benefit. Every employee irrespective of his wages is entitled to receive gratuity if he has rendered continuous service of 5 or more yrs.”

Pls. guide which of the above statements ‘a or b’ is valid?

4. Can a pvt. institute teacher with last drawn wages 1 L p.m. claim gratuity benefits as a matter of right or the decision for provision of gratuity to such an employee rests with the employer alone?

Looking forward to your valuable inputs.

For point 1 – may please refer to attachment. Though it is not from gazette / notification, it may help you to track the progress. (Winter session has already begun!)
For point 2 – You may have policies of your own in this regard.
For point 3 – My knowledge / exposure says that (b) is correct.
For point 4 – Presently on discretion of employer alone.
Please give feedback.

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Dear Friend,
The apex court is quite clearly held on this topic that Teachers are not covered under this Act, and basis on this a Bill is pending, pls note that a bill is not enforceable since it becomes Act, Further so far as voluntary coverage is concerned, u have to give coverage to your employees as per the Act only if once volountraliy covered.
Thanks a ton Mr. Parekh and Mr. Singh for your kind advice.
However, I am still not clear about the fact that if we frame our Group policy regarding payment of gratuity to teachers (who are yet not eligible to receive gratuity benefits as the Act has not enforced this provision till date), then strict conformation to the existing
Act w.r.t. minimum no. of yrs in service etc is needed or we can continue with our policy till the Govt. extends this benefit to pvt. institutes' teachers and modify our 'Gratuity policy' as per the Govt. rules as and when the Act in this regard becomes enforceable.
Please clarify the afore-said doubt.
Dear Neha

I really appreciate your concern and the trouble you have taken in researching this topic, setting a good example for being a conscientious HR who keeps on learning and updating one's skill and knowledge.

In the light of the above statement, I would like to ask you the following :
  • Why should a good organization try to stick to the minimum possible, as provided in any ACT ???
  • Is there ANY PENALTY in providing any additional or enhanced benefit - than what is/might be required by Law ???
  • Did not the Tatas provide the best examples of corporate responsibility; when they INITIATED many welfare measures, EVEN BEFORE THEY WERE CONCIEVED BY ANY STATUTES ???
  • The world over, good organizations, provide better benefits than that provided in the Acts. In fact, this is an indicator of being a good organization.

Please convince your management, whether Law or no Law; they can give BETTER BENEFITS to their teachers and set an example for others to follow.

Hope what I have written, makes some sense.

Warm regards.
Hi Neha,
If an organisation wants to provide benefits to its employees even if statute does not require them to do so, it is free to provide benefits.
If you wish to extend benefit of gratuity payment to employees who are not covered under the act, you can. In this case you need not follow the guidelines framed under the act. However, you should ensure that there is parity in benefits and considerations thereunder (years, amount, etc.) between those covered and those out of the purview of the act.
If you wish to extend the benefit to teachers, you should consider following the norms for them because, if the ammendment if it gets through will apply to teacher with 5 year conditions (and other such conditions)
Hope I have understood your question properly and have done justice to it by my reply.
Thanks Raj Sir for the motivating words... and I completely agree with you that a good organization can always go for provision of enhanced benefits to its employees, however at times instead of the 'best' policies and benefits, we hr people need to settle with the 'best possible' policies and benefits depending on their feasibility w.r.t. organizational constraints beyond our control.
And your statements certainly made sense Sir ! I'll sure try to convince the top management in this regard as per your suggestion , but to convince them as well, I first need to aquaint myself with all the aspects and possible alternatives in this case so that lack of information does not become a road-block in reaching a proper solution.
Dear Neha,
If the intended law is made applicable and your scheme is better than that, then better will prevail.
Else, you will have to amend the scheme to be with in the frame work of law suitably.
HC. Subbaramu
Regarding the 'Position of teachers under Payment of Gratuity Act 1972', just few days back a bill to this effect has been passed by Parliament and it is to be effective with retrospective date. As soon as notification to this effect is issued, all educational institutions governed by the said Act will be covered and teachers shall be eligible to claim gratuity as per Payment of Gratuity Act, 1972.
S.C. Verma
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