Facing Gratuity Payment Challenges with an Ex-Employee: Seeking Advice on Next Steps

Dear Seniors, One of our employees has worked with us for 7 years. After 8 months, we received a letter regarding gratuity payment. My management is ready to pay all his dues, but the company is currently facing financial crises which the ex-employee does not want to acknowledge.

Request for Guidance on Gratuity Payment Issues

Please suggest what actions he can take against us or what preventive measures we should consider to avoid this situation.

Regards

When the organization was doing well, did the employer pay anything extra to the employee? If not, how can the employer expect leniency from the employee?

For any dues owed to an employee, they can be put on hold (statutory benefits) for a maximum of 180 days. If your company is active to date, you have to pay them without any delay. The only option is that you can convince the employee by giving a time frame to settle his/her dues.

Hi, as per my concern, we can't stop employees' statutory benefits like PF and gratuity.

Gratuity Payment Timeline and Consequences

Gratuity shall be paid within 30 days from when it is due. Otherwise, the employer shall pay interest. The employee can file a claim petition before the Controlling Authority.

Regards,
Varghese Mathew

Meenakshi, no one cares that you gave extra in the good times. Employees consider that as their dues, so there's no use talking about that. You have three options:

- Ignore the letter and wait until the matter is put before the gratuity authority.
- Reply and accept your liability but ask for some time due to a bad financial position.
- Deny the liability if you have some reason or grounds (e.g., service break, less than 10 employees, etc.).

If you accept the liability, then you need to arrange for the amount, probably by taking a bank loan and paying it off in EMIs.

Dear Meenakshi, Your case is very weak regarding the payment of gratuity to the individual who has completed 7 years of service with your company. I am surprised that even after a lapse of 8 months, you have not paid him, and you expect your ex-employee to wait for more time on the plea of the bad financial position of the company. My advice to you is that you should immediately pay him without further delay; otherwise, you will land yourself into a problem. Your ex-employee is within his right to claim interest on the delayed payment of gratuity. For your better understanding, I am mentioning below the law position:

Law Position on Gratuity Payment

As per Section 7(3) of the Payment of Gratuity Act, an employer is required to pay the amount of gratuity within thirty days from the date it becomes due to the person.

Section 7(3A) further stipulates that if the amount of gratuity is not paid by the employer within thirty days, the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such a rate, not exceeding the rate notified by the Central Government.

Section 8 of the Act provides that if the amount of gratuity payable under this Act is not paid by the employer, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at the rate of nine per cent per annum, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto.

Section 9 of the Act stipulates that non-payment of gratuity payable under the Act is punishable with imprisonment up to 2 years (minimum 6 months) and/or a fine up to Rs 20,000/-.

I hope the consequences for the non-payments are clear to you now, and you will proceed to pay the individual without further delay.

Regards,
BS Kalsi
Member since Aug 2011

When the organization was doing well, did the employer pay anything extra to the employees? If not, how can the employer expect leniency from the employees?

Do not listen to the organization. You are entitled to receive gratuity, regardless of whether the company is bankrupt or insolvent; otherwise, you can take the employer to court.

Gratuity is the reward from an employer to an employee for rendering his/her 5 years of service to the organization. It is a statutory liability that is necessary to pay. Thirdly, the calculation can be done based on the basic salary, not on the gross.

Thanks & Regards,
Sumit