Is It Mandatory for Mid-Sized Companies to Manage Gratuity Through a Trust or Financial Body?

Dear All,

We wish to seek clarification regarding the payment of gratuity to our employees. We are a mid-sized company with close to 600 personnel on our rolls. We do not wish to establish a trust nor do we intend to become members of LIC or any other recognized financial body managing employee gratuity. However, we continue to pay gratuity whenever an employee leaves or in the unfortunate event of death as applicable.

Would this be acceptable, or is it mandatory to maintain either a trust or become members of an organized body for the management of gratuity?

Thanks & Regards,
Kalpana Rawat

Dear Kalpana,

You are absolutely right, and most companies are doing the same as what you are thinking. It is not necessary to take a policy through LIC or from any other insurance company.

Thanks,
JS Malik

Dear,

This question is being asked by a number of persons keeping in view Section 4A of the Payment of Gratuity Act, 1972. This section will become operational with effect from such date as may be notified by the appropriate Government. While the Government has not issued any notification so far, hence it is not necessary to have insurance under this Act. If any appropriate Government has issued any notification in this regard, please let us know.

Regards,

R.N. Khola

(Labour Law & Legal Consultants)
09810405361