Why Isn't My Husband's Company Paying Gratuity After 5 Years of Service?

Dear HR Professionals,

My husband is working for a US-based MNC software company located in Hyderabad and will be completing 5 years of his service with them this year. Unfortunately, the company does not pay gratuity. The workforce here in India (Hyderabad being the only branch in India) consists of between 150 to 200 employees.

I am a recruitment professional, and I understand that gratuity payment is mandatory for any kind of organization after fulfilling certain norms. Why is it that his company does not have the norm of paying gratuity? Please enlighten me more about gratuity rules.

Thank you,

Purnima

The software company in which your husband is employed has about 150 employees. This company is governed by the provisions of the Shops and Establishments Act applicable in your state. The Payment of Gratuity Act applies to shops/establishments employing ten or more persons. Therefore, your husband is entitled to receive gratuity from his employer at the rates prescribed under the provisions of the Payment of Gratuity Act, provided he satisfies the other conditions. If the employer is refusing to pay gratuity, you can file a claim before the Controlling Authority under the Payment of Gratuity Act. If you inquire with the office of the Commissioner of Labour in your state, you will get to know who the Controlling Authority is in the case of your husband.

Regards

Thank you for the useful information. One more piece of information I need is: Should gratuity be deducted from an employee's salary as per the law? I know that most companies include it as part of the CTC and deduct it from the employee's salary.

I just want to know what the law states regarding this matter.

Regards,
Monica [Phone Number Removed For Privacy Reasons]

As per the Payment of Gratuity Act, your husband is eligible to receive gratuity. Regarding your second question, it depends on many factors as the concept of Cost to Company (CTC) is not present in Indian Statutory Laws.

1. Has your husband signed any document related to not receiving gratuity when he joined the company?
2. Gratuity is not deducted from employees' salaries.
3. According to the law, your husband is eligible for gratuity.

Importance of Industrial Relations (IR) in Software & BPO Firms

On this occasion, I would like to highlight the importance of Industrial Relations (IR) in Software & BPO firms. Please share your opinions as well.

Thanks & Regards,
Narendar Paleti

Gratuity is a gratuitous payment given for long and unblemished service. This has been made a statutory right, subject of course to certain conditions. Therefore, gratuity cannot be deducted from the salary of the employee. CTC, being the abbreviation for "cost to the company," the employers make gratuity a component of CTC to make the pay package attractive. Whether gratuity is shown in CTC or not, the employer is liable to pay, subject to the conditions contained in the Payment of Gratuity Act if it is applicable.

Regards

I will only say that the company your husband is working for is legally obliged to comply with all applicable laws of the country. Needless to say, your husband is very definitely entitled to payment of gratuity as and when he becomes eligible for the same as per the provisions of the said statute.

Best Wishes,
Vasant Nair

Mob: [Phone Number Removed For Privacy Reasons] Landline: [Phone Number Removed For Privacy Reasons]

Non-Payment of Gratuity: Legal Implications

Non-payment of gratuity to an eligible employee is a serious offense, for which a complaint may be made to the concerned Assistant Labour Commissioner (ALC) and Controlling Authority. It depends on the place where the cause of action took place. Further details will be available in the Payment of Gratuity Act, to be read with the Rules thereof.

Gratuity cannot be deducted, but under certain circumstances laid down in the Act, it can be forfeited, subject to the issue of a prior notice for the same.

Dear all,

As we know, this act is implemented in all establishments where 10 or more workers are employed. However, a continuous service period of five years is required. Therefore, firstly, you should ensure that the service remains continuous.

If the service has been continuous for five years, you can fill out Form-N and submit it to the controlling authority. Surely, you will receive a positive response.

Regards,
Rajbir
HR Sr. Executive (Welfare Officer)

Kindly ask your husband to check with his company's HR whether they have applied for the Group Gratuity Cash Accumulation (GGCA) Scheme form with LIC. If they initiate the process, your husband will receive his money within 15 days once the form has been submitted.

If the company does not have any tie-up with LIC-GGCA, the employer should pay the gratuity amount as per the following calculation: Basic Salary * 15/26 * Number of years of service (more than 4 years and 241 days - gratuity eligibility).

Please guide your husband to write a formal letter to HR in case of any delays.

Thanks & regards,
Ponlakshmi K.

I totally agree with the suggestive notes given by our honorable members. Kindly ask your husband to file Form N with the company, along with a copy to the Controlling Authority. Whether it is a foreign company or an Indian company, they will have to abide by the gratuity rules of the Indian nation.

Furthermore, if your husband has not received any reply from the company, he can lodge a grievance letter to the Labour Commissioner of your area personally, obtaining an acknowledgment.

As per the gratuity rules, the same has to be settled by the employer/company within 30 days, with an intimation to the Controlling Authority.

Regards,
Ravi.V

Thank you so much for all your answers to my query. It's been a valuable effort, and I have conveyed the same to my husband. Probably his company will act accordingly.

Regards,
Purnima

Gratuity Payment Obligations

Gratuity payment is mandatory for every factory, mine, oil field, plantation, port, railway company, and every shop or establishment within the meaning of any law currently in force that employs ten or more persons. This applies to any day of the preceding 12 months where ten or more persons are employed.

It is payable to eligible employees subject to the completion of a continuous period of service as defined in the Act and other provisions of the Act. Furthermore, it can never be withheld or adjusted against other dues, but under certain circumstances, it can be forfeited as per Section 4(6) of the Act.

Non-payment of gratuity is treated as a serious offense for which a complaint may be lodged with the concerned Assistant Labour Commissioner (ALC). Detailed procedures for this are laid down in the Payment of Gratuity Act to be read with the Rules.

So, please take action accordingly.