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Dear Barenhr
Gratuity is a statutory right of an employee. He can claim it through Labour Authorities (Controlling Officer under the Payment of Gratuity Act, 1972)
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Hi Barenhr,
Whether the gratuity is mentioned in the apptt.letter mentioned or not, it's payable "ONLY" -
i) when an employee leaves the employer;
ii) and that too eligible if the employee completed 5 yrs of 'continuous service' when he/she leaves or dies before completion of 5 yrs;
iii) and he/she is covered under the Payment of Gratuity Act;
iv) it does not matter if it's mentioned in CTC or not.
If the employee fits into above conditions, he/she can file claim for gratuity in the prescribed form with the designated officers. Pl.refer the Act for further guidance.
It does not matter whether gratuity payment is mentioned in appointment order or not. Once an employee is eligible for gratuity as per Act, it will be paid. Normally organisations pay such amount along with full and final settlement, if employee is eligible. If employer did not pay, though employee is eligible then only going to labour department arises.
If the appointment letter provides gratuity in the CTC, an employee can claim gratuity even though when he has not completed the stipulated 4 years and 240 day (5 Yrs of completed service).
Gratuity is a statutory amount that an employer is required to contribute, when this amount is included in the CTC and shown as employee's total compensation for the appointed position. The amount so shown under gratuity, takes the same effect as that of his regular salary component such as basic, hra, other allowance. No part of any compensation payable for service rendered be subjected to a condition for availing it.
Interpretation of legislation Payment of Gratuity 1972 Sec.4(5) -- "nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer". The section must be interpreted with liberal interpretation - applying the principles of interpretation of statutes, the phrase "better terms of gratuity" favour the claimant (employee). The employee has every right to claim his earnings, no employer can withhold any earning due to him or subject any earning to any condition, provided that Gratuity is show as a component within the total compensation (CTC).
Dear all,
As discussed earlier, peculiar situation arises where employees are covered under CTC mode of emoluments. As all know the migration of employees from one unit to others in IT/ITES are taking place so frequently compared to any other sector. In the process when the migration taking place in quick succession ie., <5 yrs of completed/continuous service these employees forfeit their right to claim gratuity payment. No wonder if a person during his/her entire possible service period of life time say between 18 yrs & 60 yrs of age, ie., 42 yrs. broken into about 8 or 9 separations never entitled to/receives gratuity at all despite this being a statutory payment. Worse is when under CTC mode. Law makers and activists should find a solution to this anomaly so that these unfortunate persons are remedied suitably/reasonably.
I have a different perception Mr.Kumar.
In the first place, CTC method of salary administration is neither universal nor statutory. It is only a projection of total cost incurred per employee per year by the employer to assess the overall cost of employment so that compensation package can be determined either unilaterally by the employer or by negotiation with the individual employee/unions.
Secondly, the components of CTC or the conditions for their payment should not be designed in such a manner to deprive the employee of his normal monthly earnings by adding the statutory indirect benefits like bonus and terminal benefits like gratuity.
Thirdly, adding a future terminal cost like gratuity to the CTC which is ultimately a current cost of employment will lead to misconceptions only. That's how CTC could be interpreted as part and parcel of the contract of employment to stake a claim for gratuity under the guise of better terms of gratuity u/s 14 of the P.G Act,1972. Then why not include retrenchment compensation and compensation under the Employees Compensation Act,1923 for appropriate job-positions in the CTC?
Finally, job-hopping is not a modern phenomenon. It has been always there depending on the job-hopper's personal preferences. Every job-hopper is conscious of the gains and losses of his every job-change. Just because of this any attempt is made to reduce or to scrap the minimum qualifying service for gratuity, the very purpose of the concept of gratuity would be defeated.
The solution has already been suggested in my posts in this tread itself. Please go through.
As per my understanding there is no harm in deducting gratuity amount from CTC with the following condition
1. In case employee leaves the company before completing 5 years as per the Gratuity Act. then the employee is entitled to receive the amount which was deducted from CTC.
2. If employee leaves the company after 5 years then as per the statue, will receive his payment.
I don't feel any violation of law.
Dear friends,
As all of us are aware the terminal benefits include the following (other than EPF) -
1.Gratuity (in full, accrued & due)
2.Statutory bonus (if applicable, entitled to either while in service or after leaving)
3.Leave encashment (if eligible as per HR policy)
4.Retrenchment benefit (subject to service conditions and/or legally eligible)
5.Other benefits, if any
We see many of these now being quoted as part of CTC. And employees take decisions of a switch over considering the size of their CTC. To my knowledge the quantum of Gratuity more or less remain the same whether it’s nonCTC or CTC employment. It’s also true many employer even offer higher gratuity purse even beyond the statutory limits which are welcomed by employees.
Other than gratuity, many of these benefits are governed by different rules/regulations and not commonly applied.
My point here is employers’ contribution towards EPF is remitted either to the EPF Trust or to the EPFO and once remitted employees are within their right to eiter transfer or encash. And ‘gratuity’ also more or less similar payout to employers, except when comes to disbursement employees concerned who didn’t complete the qualifying service are denied. Ofcourse it’s not a violation of law.
And many courts have upheld the concept of ‘gratuity’ is not an ‘alms’ but a “reward” for the service rendered, a right of employees.
No issue every penny traced to employee is/may be part of CTC.
But the fact remains as this specific contribution for the benefit was made by the employer, like EPF, attributable to the concerned employee accounted as such and updated every year, which had a major impact in decision making of choosing the job ultimately results in a duck is a big loss/disappointment. And indeed is very harsh, if continues for the full length of one’s service, is a huge one more or less amounting in the order of 10,15,20 lakhs. And nobody can be vary of the fact that ‘gratuity’, apart from EPF, is the major source of a kitty which will be the livelihood for a retiring person to fend for him/herself for the rest of their life time. This is so especially when they have no effective pension scheme covered. That’s my point.
What Action can be take if employer not ready to Pay Gratuity to the employee after completing 5 years service. Employer mention Gratuity component in Monthly salary.
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