Gratuity Act Dilemma: Is an Employer Liable if an Employee Doesn't Apply for Payment?

Under the Payment of Gratuity Act, 1972, gratuity must be paid by the employer after an application has been made by the employee in Form I, within 30 days from the date the gratuity became payable.

Now, my question is, what is the liability of the employer if the application has not been made by the employee? Is the employer still liable to make the payment (gratuity), or are there any other provisions regarding the same?

Even if an application is not made, the employer is liable to pay the gratuity amount. Failing to do so will result in interest being calculated on the delayed payment.

Thank you.

To add on to what has been mentioned by Kumarresank, it is the responsibility of the employer to locate the departing employee and settle the gratuity payment within 30 days. If the employer fails to do so, they are required to deposit the gratuity amount with the District Labour Officer or any other Officer authorized as the Appropriate Authority under the Act.

Regards,
Madhu.T.K

Hi there,

In that case, the liability also falls on the employer, and the employer needs to instruct the employee to be aware of this procedure.

Regards,
Mona

Dear all,

If the application is not made by the employee, the employer's responsibility is to explain the procedure to all the employees.

Dear all,

If the application is not made by the employee, the employer's responsibility is to communicate the procedure to all the employees.

Reetesh Kumar Singh
HR Executive

Dear Mr. Reetesh/Ms. Madhu,

Some employers are including gratuity in CTC (as 4.81%). Is this correct? If it is, can the employer give the gratuity to an employee after resignation? (Considering that gratuity is claimed after completing 5 years of service).

Kindly update.

Regards,
Sameer

Deducting gratuity from the remuneration offered, by whatever term it is called, is illegal. If an employer does so, they are liable to refund it, even if the employee has not completed 5 years of service. Please go through the following link as well: [Madhu.T.K: CTC Vs BTC](http://madhu-t-k.blogspot.com/2010/02/ctc-vs-btc.html)

Regards,
Madhu.T.K

I want to confirm if an employee does something wrong and the organization has to file a case against him in court, can the organization deduct or hold the gratuity of the employee or deduct the expenses of the court case?

Thanks

Gratuity cannot be withheld if an employee does 'something wrong', but at the same time, the employer can hold the gratuity if the employee has been dismissed from service for an offense involving willful omission or negligence causing damage to the property of the company, violent or riotous acts, or offenses involving moral turpitude during the course of employment. This provision is outlined in section 4(6) of the Payment of Gratuity Act, which is very strict in interpretation. A minor act of violence or immorality may not be sufficient to forfeit gratuity.

Regards,
Madhu.T.K

What are the rules that govern the payment of gratuity from a firm that has gone into liquidation? Is gratuity a preferred payment to a "non-workman" category of employee?

In the event of a firm going into liquidation, the payment of gratuity is subject to specific rules and regulations governed by the appropriate labor laws or regulations in the relevant jurisdiction. These rules typically outline the priority of payments to different categories of employees, including non-workman employees, in case of liquidation.

It is essential for employers and employees to be aware of these rules to understand the implications for gratuity payments during liquidation proceedings. Consulting legal experts or labor authorities can provide guidance on the specific requirements and priorities concerning gratuity payments in such circumstances.

Any establishment that had employed at least 10 persons, whether workers or not, during the 12 months preceding its liquidation is bound to pay gratuity. This is an amount payable to all employees, including managerial staff, who have completed at least 5 years of service. The gratuity amount will be equal to 15 days' salary for every year of service with the organization, subject to a maximum of Rs 10 lakhs.

Madhu.T.K

Gratuity is a payment made by the employer, and it covers all employees irrespective of their salary level. Even if no claim application is made by an employee, the employer is obligated to make the payment. It can only be refused under circumstances of riotous behavior or misconduct involving moral turpitude. Gratuity cannot be attached.