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Dear Friends,
I would like to share a very interesting Supreme Court's Judgement on the Gratuity Act. That, the Daily wage earners are also eligible for payment of Gratuity.
1. The petitioner approach the Controlling authority against the Employer State Government. The Controlling authority was pleased to allow the petitioner for payment of Gratuity.
2. As aggrieved with the Controlling authority's order the Employer filed an appeal before the Appellate Controlling authority. The Appellate authority confirm the order of the Controlling authority.
3. While again the aggrieved Employer filed an appeal before the High Court on the ground that the concerned employee was regularized after 22 years and thereafter worked for 3 years, and therefore does not qualified the eligibility criterion for payment of Gratuity. The High Court set aside the order of the Appellate authority and allowed the Employer's petition.
4. Upon aggrieved, the employee filed appeal before the Division Bench of that High Court. The Division bench confirmed the views of the Single bench.
5. Finally the aggrieved approached the Supreme Court of India. The Supreme Court allowed the petition and confirmed the order of the Controlling authority and set aside the order of the High Court. The views taken by the Supreme Court that be it a daily wage earner, but has actually qualified the term 'Continuous Service' under the Payment of Gratuity Act and the years of his regularization should also be taken into consideration for calculating the Gratuity.
Attaching the judgement in this regard. Please check.

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MY question is "Whether Special allowance qualify the ingredient of salary under the payment of gratuity act 1972 ." As I have not been able to lay my hand any court rulings on this query,
I am making a submission before the
Before the Honourable Assistant Labour Commissioner ( Central )and Controlling Authority under the payment of Gratuity Act 1972 as below , for an Outcome .
Respondent :
The the following submissions are placed before your good selves to substantiate my claim for reckoning the special Allowance as part of wages /salary for calculation of gratuity
1)Wages definition under payment of gratuity act1972
Section (s) of Paymnet of Gratuity act defines “wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employments and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
2)The intent and objective of the this statute should be to exclude from the purview of the definition of wages only such payments like Bonus , HRA, Overtime wages and other allowances . The Special Allowance may fit into exclusion category as an allowance from the definition of wages as long as this payment remains to at a reasonable percentage of Basic salary or similar to HRA ,Bonus,Over time which are restrictively linked to certain percentage or norms in accordance with the respective statutes . In the case of Special Allowance which is abnormally high and greater than the very Basic salary , it is an ostensible act on the part of employers to circumvent the statute and thereby restrict / deprive the enhanced monetary benefits due to employees arising out of provisions of the Payment of Gratuity Act 1972 by taking shelter under the definition of wages under the statute .
3)The payment of gratuity being a social security legislation , a more broader and benevolent interpretation of the definition of wages has to to be taken..
In the current situation , it is permissible/open to an employer to fix the salary structure of an employee who is designated as an Executive in a supervisory cadre, as below
Basic Pay : 36,000( 45%)
HRA : 18,000 ( 22.5%)
SPECIAL Allowance 26,000( 32.5%)
Gross salary : Rs 80,000/ P.M
4)Whilst in the absence of Dearness Allowance which is an definite ingredient of salary /wages under the payment of Gratuity act 1972 essentially meant to secure and further the standard of living of the employee, it is an unfair and grossly exploitative on the part of the employers to allocate major portion of gross salary ( say more than 30% of gross salary) detrimental to the interests of the employee’s terminal dues / retirement benefit .
5)In should be held that any such Any allowance irrespective of its nomenclature which is fixed at an unreasonable and illogical quantum should be held to be dubious and subterfuge and that such allowances ( irrespective of its nomenclature ) should be an essential ingredient of salary /Wages as defined under the payment of Gratuity act 1972 and hence should be reckoned for the calculation of gratuity .
6)It may not be out of context to highlight here that in certain negotiated wage settlements , the managements /employers do agree in response to demands of union to treat certain wage components like ad-hoc, special Allowance etc as part of basic wages for the purpose of reckoning the statutory benefits like provident funds, Overtime, gratuity act . Whilst such agreements are possible through direct negotiation at bipartite /tripartite forum ,why not such special allowance be deprived to those employees in supervisory /executive cadres who are neither bargainable employees nor unionized.
7)It is an acceptable practice in industry fix the Basic salary and Dearness allowances applicable to union employees at anything between 60% and 90% depending upon the outcome of wage negotiation between employers and workmen
8)Even in the respondent company other employees who are unionized and bargainable category , the basic salary forms anything between 50% to 90% of gross salary depending on the plant and location. Since every employee including a functional Director being brought under the definition of “employees” under the payment of gratuity act 1972 , the differential treatment meted out to one section of employees who are in supervisory / Executive /managerial cadre is unfair and against the principle of equity and constitutional validity.
9)The objective of this fixation of salary structure is conscious decisions between parties aimed at ensuring employees’ statutory benefits like OT,PF , gratuity etc. This being so, only a particular section of employees in an Establishment cannot be allowed to denied the benefit whilst the statute seeks to extend the benefit of gratuity all employees.
10)As the statute ( Payment of gratuity act 1972) does not make a distinction between employees of bargainable employees and supervisory / executive employee ( as per broad definition of employee under the act, it is grossly erroneous and devoid of natural justice to keep off special allowance from the ambit of wages under the statute with respect to supervisory/ executive/managerial cadres who are otherwise eligible employees for receiving gratuity under the statute . Therefore the dual standards in dispensation of gratuity is arbitrary , capricious and against the spirit of the provisions of the the act.
11)It is therefore prayed the Honourable Controlling Authority to consider the above submissions in an dispassionate manner and pass an order on merits of grounds adduced and render justice
.......Could you kindly opine if my submissions above would hold water and also advise me if Controlling Authourity ( Assistant Labour Commissoner ( Central) or appeallate Authourity ( Central Dy.Labour Commissoner) rejects my claim whether I could seek the intervention of Honourable High Court
Thanks & regards
Dear all,
while the payment of Gratuity , we have seen in some cases the eligibility of 240 days is not considered and the gratuity is payed on prorate basis for example if a employee has worked for more than 240 days he gets 15 days pay.where as in some cases if he has worked for less than 240 days he is given gratuity on the basis of no of days worked *15/240.
Just need to understand that is it possible to give Gratuity on the basis of Prorate.
Request for Guidance.
Gratuity cannot be paid on pro rata basis on the basis of days of attendance ( falling less than 240 days which constitutes continuous service) . Even if an employee has been absent for more than 6 months in a year either for consecutive months or intermittently wherein his attendance falling short of 240 days in that year, yet he is deemed to have put in continuous service in that year unless the employee has been issued an order mentioning that he had break in service in that year or service interrupted for 6 months. Again before issuing such an order suitable disciplinary action should have been initiated against such employee by manes of a show cause notice and an explanation being sought and if need be an enquiry should have been held to prove that the employee has been absent for 6 months in the relevant year . Another pre-requite is that there must be a suitable provision in either certified standing orders or an established rules and regulations/ policies of the company to deny gratuity in a year wherein the employee has failed to render continuous service as contemplated in Payment of Gratuity act . In other words , in the absence of such provisions or procedure being complied with , an employee will be deemed to rendered continuous service in a year despite his absence in that year being more than 6 months or for that matter the whole year . You need to establish a record that an employee has not rendered continuous service in any year for denying gratuity. Mere counting of days of attendance in year does not serve the purpose.
Post retirees ( above 58/60 years of age) who joined a new company on a contractual terms initially for one year with consolidated salary or Basic salary as offered by the company to perform a particular role /job and further contract getting renewed every year ( year on year) without a break in service or without gap between first contractual engagement and secondly renewed contract through a stand alone letter of offer of contractual employment for each time of renewal are eligible for gratuity if such contractual engagement in the name of Fixed term contract of one year and subsequent extension through stand alone offers every time without a day's break for aggregate Engadget in excess of 5 years and above ) notwithstanding the stand alone letters of offer of contractual employment being issues n number of times.
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