Gratuity Dilemma: How Can Entrepreneurs Handle Refunds for Short-Term Employees?

As an entrepreneur, if I have to return the amount of Gratuity for those employees who have not served for more than 5 years, what do I need to do for this? How can I save this amount that is going to lapse?

Dear [User],

Gratuity is paid to employees who have completed five years of service in an organization. Your question is not clear.

Thank you.
J. S. Malik

Corrected and Formatted Text:

Dear malikjs,

Gratuity is paid to employees who have completed five years of service in an organization. Your question is not clear.

Is there any means by which one can get their money back?

What can an organization do in this regard?

Thank you.
J. S. Malik

As an employer, you are not bound to pay gratuity to employees who served less than the qualifying period of 5 years. The employees cannot claim the amount either.

If you have provided a sum every year with a view to finding funds available for the payment of gratuity, by any means including investment in mutual funds as are available nowadays, the same could be regarded as an appropriation of profit (with a debit to Profit & Loss Account). If the same is not utilized, naturally, it will remain as your fund with all attributes of undistributed profit. It will not lapse but will be an investment only.

Regards, Madhu.T.K

Hi,

Your question is not clear to me. Why should you return the gratuity of persons who have not served for 5 years? You have to make provision for payment of gratuity, but the payment will be made only after completion of 5 years of service. If not, the amount will remain with the employer. You can also consider going in for the Group Gratuity scheme of LIC.

Cyril

Hi,

Could you clarify whether gratuity is calculated annually? We know that gratuity is given after the completion of five years of continuous service. Is there any provision where gratuity is calculated before the completion of five years?

As per my understanding, it is typically calculated only after superannuation, retirement, or resignation. Cyril mentioned that you can invest the same in a Group Gratuity Scheme. I would appreciate clarification on this issue.

Hi,

Gratuity should be calculated when it becomes payable. If you opt for the group gratuity scheme, you have to adhere to the prescribed guidelines. Please contact the authorized representative for assistance, and they will provide guidance on the matter. There are several organizations that are covered under the Group Gratuity Scheme.

Cyril

Every employee (other than an apprentice), irrespective of his wages, is entitled to receive gratuity after he has rendered continuous service for 5 years or more under the Payment of Gratuity Act 1972.

However, if the organization is covered under the A.P. Shops & Establishments Act, 1988, every employee who has put in continuous service of not less than one year shall be eligible for service compensation amounting to fifteen days of average wages for each year of continuous employment, as per Section 47(3) of the said Act.

Dear All,

I have worked sincerely in a Pvt Ltd company for a period of 12 years and 6 months, and I have been terminated from service without any fault of mine. The company has attested my PF withdrawal form for the withdrawal of my PF amount, but they are denying to settle my gratuity and other benefits with the reason that these benefits will not be given to terminated employees. Kindly advise me on how to proceed further to get my settlement. Can the company hold my settlement? What do I have to do to get gratuity and other settlements? I am awaiting your valuable suggestions. If possible, please send a copy of your reply to the below-mentioned email ID as I am not very familiar with social networking.

With regards,
Shree
Email ID: shreekanthblr@yahoo.co.in or shreekanthblr@gmail.com

If an employee is dismissed for misconduct after conducting a proper inquiry, then the employer can withhold his gratuity. If termination is not on the ground of misconduct, then the employer is bound to pay gratuity. Therefore, apply in form I. If you do not understand it, report to the District Labour Officer.

Regards,
Madhu.T.K