How Can I Persuade Management to Address Gratuity Policy Renewal Issues?

Dear seniors,

Attention Required: Gratuity Policy Renewal Issues

1. We have submitted the list of employees for the year 2013 to LIC of India for the renewal of our Gratuity Policy.

2. Later, we received a letter from LIC stating that an Adhoc amount of Rs. xxxxx has to be paid for the renewal of the policy.

3. For the last 5 years, the company has been issuing a cheque for the Adhoc amount and renewing the policy for that year.

4. Every year, after submitting the cheque for the Adhoc amount, LIC has sent the actual quotation for that respective year.

5. For the last five years, the actual quotation amount has not been paid by the company.

6. Now, the quotation amount has reached Rs. 18 lakhs.

7. Management is not ready to pay Rs. 18 lakhs. For the last 5 years, the company has only been paying the Adhoc amount.

8. Now, gratuity settlement claims are getting rejected due to a shortage of funds.

Kindly help me on how to convince the management to pay the actual quotation amount. Your response is highly appreciated. Thanks in advance.

Regards,

K. SAIKISHORE

SENIOR EXECUTIVE - HR

[Phone Number Removed For Privacy Reasons]

You have to obtain the contribution list, employee-wise, for the last 5 years, duly reconciling it with your declaration/list of employees to be covered, furnished to LIC for gratuity purposes. Arrive at the year-wise sum of the employer's contribution due to LIC, then adjust the ad-hoc amounts paid year-wise, and you will get the balance due to LIC or excess paid, if any. If you add up all the years of such amounts of balance due/excess paid, if any, you will get the net amount payable or adjustable. Care should be taken to eliminate names of employees who have left or been deleted and settled in the list of employees each year, duly adding new entrants year-wise. Also, ensure that the list of employees and the amount standing against each one of them every year takes care of the provision of the Gratuity Act. If this exercise is carried out, you will know where you stand against the claim of Rs. 18 lakhs.

It's very dangerous that gratuity claims are getting rejected due to this failure in reconciling year-wise payments and dues. You'll end up paying overdue interest until the claims are settled. A shortage of funds is no excuse.

This confusion could have been avoided had you reconciled every year and settled the contribution then and there itself instead of allowing the differences to continue for 5 years now.

Regards,
Kumar S.

I joined the company last year and reconciled all the five years, prepared year-wise statements, and presented them to the management. However, they are not satisfied. They seem confused with the Adhoc amount and quotation amount. For the past five years, they have adhered to the same practices and have instructed me not to implement new processes. I have remained quiet about it.

I am interested in knowing how the interest is calculated if the amount is carried forward to the next year.

Regards,
K. Saikishore

You may have to point out to your management that they have a legal liability to pay gratuity as per the law. It is up to the management to pay the dues out of their pocket or face the facts and clear dues with the insurance company. If the management does not do this, it is antagonizing its former employees and the insurance company, besides acting against the law and spoiling its image. You may have to suitably make them understand these downsides.

Dear Kishore,

Accepting or not accepting the reconciled figure has its own repercussions. If you do not pay LIC the amount they require, your gratuity claims will not be processed. This may leave you in a difficult position when dealing with your employees and the Authorized Officer under the Gratuity Act. Additionally, you may incur interest charges from both LIC and your employees. Since your management is not willing to accept the reconciled figures and insists on continuing with ad hoc measures that LIC will not accept, it is likely that all parties will end up in legal disputes. I advise you to prepare a detailed report with all relevant information, emphasizing that the ultimate responsibility lies with your management to make the final decision on how to proceed.

Regards,
Kumar S.

Addressing Issues with LIC and Gratuity Policy

If the work is incorrect or LIC has made a mistake, or if there is evidence that they have only requested the ad hoc amount and not the full amount, you can escalate the matter to higher management at LIC. Request one of your directors to accompany you to emphasize the seriousness of the issue. LIC is very conscious of its image and service levels.

First of all, read the letter or notice from LIC calling for ad hoc payment and the quotation received on payment of the ad hoc amount. Does it mention the payment difference between the ad hoc and quoted amounts after certain analysis? If not, is there a deficiency of service by LIC? LIC cannot absolve itself under the plea that the employer did not pay the quoted amount for many years. How can they renew the policy if the employer does not comply with the payments from previous years? Are they only interested in receiving money in the name of business but rejecting claims of eligible employees? Inform LIC that once they have collected money for a year and continued to renew for later years without rectifying the shortcomings, they are liable for statutory payments to eligible employees. Any damages or penalties arising from non-payment shall be their responsibility. First, read and understand the clauses of the gratuity policy.

LIC cannot have the cake and eat it too. They must understand their obligations once they have accepted money in the name of the gratuity policy.

Best wishes

Respected Seniors,

Could you please explain what the ad-hoc amount and quotation amount from LIC are? I am facing the same problem. My organization paid the premium amount for the gratuity policy for the year 2012, but the list of employees was not provided along with the details of their BASIC salary.

The policy is set to expire on 31st March 2013, and LIC requires the details of employees for both years. Consequently, LIC has put on hold the claims of employees.

What should I do next?

Regards,
Rahul

Every year, LIC sends a letter to the company stating the need to renew the policy for that year. Meanwhile, they request an ad-hoc amount deposit before submitting the list of employees for that year. After submitting the list, LIC calculates the premium based on the employees' age and date of joining and sends the actual quotation amount for that year. The company can directly pay the actual quotation amount after submitting the list of employees. Paying the ad-hoc amount is not necessary if we renew the policy on or before the 31st of March.

Regards,
K. SAIKISHORE

Mr. Saikishore has briefly detailed the features. Please read the scheme carefully and seek guidance from our members if required.

Regards