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biseshwar
Hello 2 all, i m Biseshwar can anyone suggest me, What is the contribution rate of gratuity? Whether it is contribute by employer or deducted from employee?
From India, Delhi
Madhu.T.K
4193

There is no contribution to gratuity. It is an amount payable by the employer (employer alone without taking any amount from the employee as deduction from his salary) when an employee leaves after serving him for a long period. Therefore, it is a reward for long service. In order to avoid confusions regarding what constitutes long service and what should be the amount payable for the long service it was decided to have a legislation and Kerala state enacted the Kerala Industrial Employees Payment of Gratuity Act, in 1970. Later on a central Act was passed in 1972, viz, the Payment of Gratuity Act, 1972.

As per the above Act the service for entitlement of gratuity is fixed as five years and as such any employee who is leaving the establishment to which the Act applies, after completing at least five years of service will be getting gratuity at the rate of 15 days salary at the time of leaving for every completed year of service. Any fraction of a year of service above six months shall be taken as a year. Therefore, if an employee is leaving after completing, say seven years, six months and one day, then he will be getting gratuity for eight years. It is to be paid by the employer alone and no amount should be taken from the employee towards it.

Regards,

Madhu.T.K

From India, Kannur
mrxyzee
1

Dear All,
There a company named Robert Bosch, which is deducting 4.81% of Basic Salary towards the Gratuity. And this money is collected over a period of 5 years and then the employee can retrieve it.
Is this how it should be?

From India, Madras
Madhu.T.K
4193

No, not at all. Gratuity amount should not be deducted from the salary. it is a payment to be made by the employer alone. It is OK, that it is a cost to company but it should not be deducted from the monthly salary. Moreover, the amount payable at the time of employee's leaving which may take place after 10 years, 20 years or even 30 years, will have to be calculated on the salary of the employee at the time of his leaving, that is, 10 years, 20 years or 30 years, as the case may be, from now. Is it possible to work out that future salary?
Regards,
Madhu.T.K

From India, Kannur
Mohi089
Gratuity amount is paid to the government or how the amount is managed...? where the amount is accumulated...?
From India, Bengaluru
nathrao
3131

Company is mandatorily expected to take a group Policy to cover gratuity payments.
Sec4A of payment of gratuity act refers in this connection.
Extract
Section 4A in The Payment of Gratuity Act, 1972
19 [4A. Compulsory insurance.—
(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer: Provided that different dates may be appointed for different establishments or class of establishments or for different areas.
(2) The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1).
(3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).

From India, Pune
Madhu.T.K
4193

Compulsory investment of gratuity fund in LIC is subject to notification by the state government in this regard. Please read "With effect from such date as may be notified by the appropriate Government in this behalf.." This implies that this is mandatory only when the state government has notified the date on which this provision, ie, section 4A, become effective.
From India, Kannur
nathrao
3131

What is gratuity the plain meaning of gratuity?
Something given voluntarily or beyond obligation usually for some service.
This being the meaning of the term, question of employee being asked to contribute does not arise.
Learned posters have clarified the legal position clearly in earlier posts.

From India, Pune
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