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I understand that the prevailing rate is 15%.Iam not having a copy of the notification with me. B.Saikumar Hr & Labour Law Advisor Mumbai
Hello Mr.Saikumar,

I spoke to my father's employer regarding the interest due to the delay in Gratuity pay out, and below is what the HR manager told me:

He said that the company cannot withold the Gratuity with them if it is not claimed or paid out to the nominee for any reason. In that case that liable Gratuity amount is paid out to some fund called Labour Welfare Fund and not kept with the employer. In case a nominee claims it sometime later (or say after years) then they have to claim it from the Labour Welfare Fund and not from the company. So, according to him, today if we claim the Gratuity after 3 years then we should be checking with the Labour Welfare fund. And the employer is never liable to pay any interest on it. But he also said, since the HR team got changed after 2010 (after my father's demise), he said that his new team somehow could not ascertain if indeed the Gratuity money was given to the Labour Welfare Fund and more so, to "help us avoid the misery of getting into the process of claiming the money from the Labor Welfare Fund", which according to him, would have been a horrendous task to do. So in view of all this, and as per him they wanted to "make it easy for the family of their ex-employee to get the Gratuity easily", so they have paid only the principal Gratuity amount. And he said hence because of the clause to deposit unclaimed Gratuity inthe Labour Welfare Fund the company in NOT liable to pay any interest.

Has what the HR manager told me, true? But somehow I am not convinced with what they say. Can you please guide me if this is true.



Hello Ritu

The Labour Welfare Fund Act particularly the Bombay labour Welfare Fund Act provides for crediting unclaimed accumulations to the welfare fund. However the Sec.7(2) of the Payment of Gartuity Act makes it obligatory on the employer to determine the amount of gartuity paybale to an employee and give notice in writing to him informing the the amount of gratuity payable. You can ask them as to why they have not given such notice. This apart, the company should have made efforts to contact you for paying you gratuity before deciding to credithe amount to the welfare fund. Whether they made such efforts. The employer can decide to credit the amount to welfare fund only when he gave notice of the dues to the employee and the employee did not make any claim.Therefore the delay is due to employer's lapse also apart from the delay on your part out of ignorance and hence the employer is liable to pay interest. You can make an application to the company to that effect. If teh company does not respond, you can approach controlling authority for claimimg interest. If the amount involved is small, you can take a call on this option.


HR & Labour law advisor


Hi Friends,
Regarding payment of Gratuity on death of employee:
I understand that completion of 5 years continuous service is not necessary. However, the minimum period is not mentioned.
However on analysis of various provisions under the Act:
- Payment of gratuity is calculated as 15 days for every completed year of service (so practically it has to be 1 year atleast)
- Completed year of service means continuous service for 1 year
- If an employee has completed 240 days in the last twelve months (including days like lock out, maternity leave, etc) - it means continuous service of 1 year
So, we can conclude that if an employee has worked for 240 days, he becomes eligible for gratuity incase of death.
Views of learned members sought.

Dear Friends,
This is the clarification I received from the Life Insurance Corporation regarding the payment of gratuity in case of any death
Dear Sri Manjunath
We are servicing your NGGCA policy having no 501001070. We have to metion that as per the policy conditions, the following benefits are payable to trustees.
1. In case of retirement of individual employee: Total accrued grty
2. In case of resignation : Total accrued grty as on the date of resignation.
3. In case of death of employee while in service : Accrured grty as on date + death benefit which will be equal to an amount, assuming that the employee would get, had he survived on to the last day of his retirement.
This is for your info.
B Suresh Babu
Many of our friends have clearly stated that there is no need to pay till his superannuation. As per law they are right. When you take a policy, we have to pay as clariefied by the LIC.

Mr. Manjunath thank you for your reply.
With respect to the quantum of Gratuity payable, I think you have given good inputs.
However, my question was a little different. I was referring to the minimum period of service to be rendered by an employee to be entitled to Gratuity.
For instance: An employee has worked for just 7 days and then dies. Whether he is still eligible for Gratuity?

Dear Friend,
In case of death. the minimum period of service does not arise.

Thank you for the clarification

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