Dear All,
I am afraid perhaps there is some confusion in our minds about gratuity, EPF Trust, group insurance etc. These are all different concepts. Presently we will deal with only 'gratuity' subject. Other subjects can be discussed separately when need be.
For gratuity, there is no trust like EPF. It is to be paid by the employer from his own funds. However, the employer has option to go in for a gratuity policy from some insurance company. The law does not advocate payment of gratuity from employer's own funds only nor prohibits its payment by some insurance company. The law is only concerned with payment of gratuity to an employee who has rendered minimum five year service. The condition of minimum five service is not applicable if the employee dies or is permanently injured and rendered incapable of discharging his duties for the rest of his life. In such cases, irrespective of the length of service below 5 years, gratuity is payable on humanitarian ground. There is no provision to recover gratuity from the employees' salary and return it to them on termination of service. It is to be paid from employers' own funds or through some insurance policy held by the employer at his own cost. Such gratuity policies are different from group insurance policies of employees. New HR executives may contact the national insurance company and get more details about their gratuity policies. Small firms which come under the orbit of Payment of Gratuity Act, 1972 may consider such policies where the insurance company assumes responsibility of the employer for payment of gratuity to the expired/retired/resigned employee or his/her legal heirs. However, only the employer and not the insurance company is finally responsible for payment of gratuity to the expired/retired/resigned employees.