Are Employees Entitled to Gratuity if It's Missing from Their Appointment Letter?

Hi,

In my organization, some employees do not have the Gratuity component in their appointment letter, and their service is about to complete 5 years in this company. Please provide me with details on whether they are entitled to avail of gratuity from our organization. How are they entitled if it was not proposed at the time of appointment? Please brief me.

Thanks,
Aarti

Dear Ms. Aarti,

If an employee completes 5 years of continuous service with the organization, he/she is eligible to receive gratuity under the Payment of Gratuity Act, 1972. Whether you mention it as a component in the appointment letter or not is immaterial when the act is applicable.

Regards,
Sekhar

Dear Mr. Shekhar,

I agree that you cannot provide detailed information on approximately 35-40 acts applicable to employees as this is a statutory provision, and employees are entitled to receive gratuity.

Thank you,

J. S. Malik

Thank you for providing me with the details. Kindly, let me know if there is a website where I can find all this information in written form so I can present it as proof.

Thanks,
Aarti

Gratuity is a statutory benefit for employees, and the employer is obligated to pay gratuity to individuals who have completed 5 years of continuous service, regardless of the contents of the appointment letter, standing orders, service rules, or agreements. Trainees are also eligible for gratuity. Please refer to the Payment of Gratuity Act.

Hi,

Anyone who completes 5 years of continuous service will be entitled to Gratuity. Please let me know how we can claim Gratuity. The organization may refuse the same.

Thanks & Regards,
NISHA
MARKETING EXECUTIVE

Hi, this is Sangeeth Kumar currently working at Universal Shipping Company Pvt Ltd for the past 2 years. I want to inquire about my provident fund balance amount.

Dear Sangeeth,

I do not think it is good to interrupt someone in between when a query in relation to gratuity is in progress. You can reply to that query if you want, but it is not a good habit to raise a question in between that does not have any relation to the original query.

J. S. Malik

To Arti,

For Gratuity Act 1972, liability arises after 5 years of service. It does not matter whether your organization keeps the provision in the Appointment Letter or not. If employees make a claim for Gratuity, the court also recognizes the same.

Thanks,
Sanjeev

Dear,

What Mr. Malik said is correct. It is immaterial whether it is mentioned in the appointment letter or not; the law is applicable, and you are eligible for getting your gratuity upon resignation or superannuation.

Hi,

I believe this thread has ended. However, I saw one of the PPTs on gratuity and noticed a clause stating that in the 5th year, if the employee has completed around 240 days, he/she is still eligible for gratuity. Is this true? Also, how do we withdraw the gratuity amount?

Regards,
Madhusudan.

Dear Mr. Malik,

Our company is 5 years old, and some employees are about to complete 5 years in our company. We were making provisions for gratuity earlier, and now we have decided to set aside a gratuity fund with LIC. However, they are insisting that we form a society, but our management is not keen on forming any society. Please let me know how we can manage these funds without forming a society.

Thanks,
Prachi

Dear Aarti,

As an HR professional, it is needless to say that whenever any statutory force is in place for any HR-related issues such as Gratuity, ESI, PF, Professional Tax, Income Tax, Labour welfare fund, Shops and Establishment Act, Factory Act, etc., the provisions of such statutes are automatically applicable to any employee in a given case.

Having said this, in your case, it is applicable. You may have a more beneficial scheme compared to the Gratuity Act, but the act's provisions are always binding. Please decide on your issues accordingly.

If you have any issues, feel free to contact me without any hesitation.

With regards,

Himanshu Pathak
Torrent Power Ltd, Ahmedabad
09227233315
himanshupathak@torrentpower.com

All the points given are correct. Instead of making the payments to employees (which will sometimes be of high value) and jeopardize the financial strength of the organization, you can form a trust (LIC will assist you in forming the trust). All the funds pertaining to the gratuity can be paid to LIC by obtaining a policy, which is exempted from income tax. If the trust is not approved, you are not eligible for the payment made towards the policy. All the claims will be settled by LIC to the trust, and in turn, you can make the payment to the employee. The advantage of obtaining the policy is that the employee receives the gratuity amount until the date of retirement in the event of death.

Srinivas

Dear Malik,

I do not think it was right of you to comment on Mr. Sangeeth's interruption query regarding PF. After all, doesn't PF fall under a similar category as Gratuity? He may not be an HR professional like you and me to differentiate properly between PF and Gratuity. For a third party, all fall under the same tree. So it was quite natural for him to raise such a query in between. At least he was smart enough to know where to put it and under which thread. Please don't post such remarks against members anymore in public. It makes the atmosphere unpleasant. You can perhaps send him a personalized message.

One more thing, Mr. Malik, it is easy to point out mistakes, especially with a person not from your field of expertise. It takes greater maturity levels and wisdom to understand that and react accordingly. Please take this as a healthy criticism. Keep posting... Your other posts seem to be great and very interesting.

Dear Malik,

I do not think it was right of you to comment on Mr. Sangeeth's interruption query regarding PF. After all, doesn't PF fall under a similar category as Gratuity? He may not be an HR Professional like you and me to differentiate properly between PF and Gratuity. For a 3rd party, all fall under the same tree. So it was quite natural for him to raise such a query in between. At least he was smart enough to know where to put it and under which thread. Please don't post such remarks against members anymore in public. It makes the atmosphere unpleasant. You can perhaps send him a personalized message. One more thing, Mr. Malik, it is easy to point out mistakes, especially with a person not from your field of expertise. It takes greater maturity levels and wisdom to understand that and react accordingly. Please take this as healthy criticism. Keep posting... Your other posts seem to be great and very interesting.

Hi everybody,

Dear Sangeeta Mam,

I have seen your PPT on Gratuity, and it is very helpful. Could you please clarify for me, for example, "If an employee draws Gratuity of 1,00,000/- from a company and then joins a new company, is he only entitled to receive the remaining 2,50,000/- from the new company?"

Regards,
Santosh Kumar

Yes, Sangeeta. Besides an answer to the immediate above query, I am also keen to know if an employee completes 240 days in the 5th year of continuous service and there is no "case" to withhold this entitlement, can we actually pay the Gratuity benefits? Can anybody in the group corroborate this, i.e., in case they have privy to such a settlement in their organization?