Struggling with Gratuity Payment Dispute After Long Service: What Should I Do Next?

To all respected members,

I was working in a public limited company as a VP for more than 25 years. In May 2009, I attended my headquarters in Gurgaon and asked our Director and CMD to grant me a long leave for the treatment of a frozen shoulder, which they accepted. All the above were verbal sanctions only.

On September 27, 2013, I requested my employer to make my full and final payment to me.

On October 18, 2013, my employer informed me by mail that my resignation papers were not available with them (which was not given by me as I was on leave without pay).

On October 23, 2013, I sent my resignation letter by mail to my employer.

I followed up on the matter with 5 to 6 reminders, but I did not receive any reply or feedback from the employer.

On March 10, 2014, I gave notice through my lawyer.

On March 13, 2014, the employer informed me to pay Rs. 3.5 lakh for my gratuity payment, which was not accepted by me as I was asking for a gratuity of Rs. 10 lakh and leave encashment as per present rules.

On March 31, 2014, the employer again sent me my final account in which they added leave encashment and my balance salary of May 2009, but my gratuity was kept at only Rs. 3.5 lakh whereas it should be Rs. 10 lakh.

In view of the above, please guide me on what action to be taken by me.

1. My resignation was accepted by the employer on 26/11/2013.

2. Will I be able to claim a gratuity of Rs. 10 lakh?

The total amount of my gratuity is Rs. 12.80 lakh.

Please advise accordingly.

Thank you,

A. K. Solanki

Dear Mr. Solanki,

Sorry, your query is backed by insufficient details, particularly important ones concerning your ultimate claim. An employee is entitled to receive a maximum gratuity, subject to the monetary ceiling of Rs. 10 lakh. However, this entitlement depends on your last-drawn salary, specifically including components such as Basic Salary and Dearness Allowance.

It is a common practice in industrial Salary and Wage Administration, as you may be aware being an experienced V.P., that the compensation structure is designed to minimize the burden of indirect financial commitments for the employer and the tax burden for employees. Additionally, there is a possibility that your management may not accurately reflect the length of your qualifying service for gratuity or be unaware of the raise in the ceiling limit.

To assess the maintainability of your claim for maximum gratuity, please provide the following details after verifying the availability of any documentary evidence:

(i) Your initial date of joining the services of the management

(ii) Your last-drawn salary with a breakdown of details

I hope this helps clarify the information needed. Thank you.

Regards

Government Order for Gratuity Settlement

Good morning, sir. I am attaching the government GO for your reference and records. Kindly forward this to your previous organization and ask them to settle the gratuity according to this GO.

Regards,
Alphonse

Dear Mr. Solanki,

Sorry, your query is backed by insufficient details, especially important ones considering your ultimate claim. Of course, an employee is entitled to receive a maximum gratuity subject to the monetary ceiling of Rs. 10 lakh. However, it depends on your last-drawn salary, including only basic salary and dearness allowance. It is a common practice in industrial salary and wage administration, as you may be aware of as an experienced VP, that the compensation structure is designed to minimize the burden of indirect financial commitment of the employer and the tax burden of employees. Moreover, there is a possibility that your management may differ on the actual length of your qualifying service for gratuity or be unaware of the raise in the ceiling limit.

In order to assess the maintainability of your claim for maximum gratuity, please provide the following details after ensuring the availability of any documentary evidence:

(i) Your initial date of joining the services of the management.

(ii) Your last-drawn salary with a breakdown of details.

Details of Employment and Gratuity Claim

1) I joined my company in the year 1984 (01/04/1984).

2) I worked for 25 years.

3) In May 2009, I requested leave without pay, which was verbally accepted by the management.

4) In September 2013, I requested payment of my gratuity.

5) My employer asked me to send a resignation which I sent on 23/10/2013, and it was accepted by the management on 26/11/2013.

6) The employer agreed to pay gratuity for the period 1984 to 2009 for 25 years as per the Gratuity Act applicable in May 2009, subject to a ceiling limitation of 3.5 lakh.

7) My employer did not pay my dues in May 2013 as I was on leave without pay. Now, as per the new gratuity ceiling of 10 lakh notified in May 2010 Gazette.

8) Kindly advise me on what amount I shall claim from my employer - Rs. 3.5 lakh as per the prevailing act of 2009 or Rs. 10.00 lakh as per the present act. Please give me your valuable advice.

9) My last salary details are basic pay Rs. 60,000 + DA Rs. 40,000 = Rs. 100,000.00 total.

I hope you will solve my problem and guide me in the matter.

Thanks and regards,

Ashok Kumar Solanki

25/04/14.

Based on the details you have provided, the actual amount of gratuity due to you on the date of your resignation (23-10-2013) is calculated as follows:

Gratuity Calculation Details

(1) Date of entry into service: 01-04-1984

(2) Date of termination of service: 23-10-2013

(3) Gross service rendered: 29 Years, 6 Months, 22 Days or 30 Years

(4) Period not eligible: 01-09-2009 to 23-10-2013 (LLP), i.e., 5 Years, 10 Months, 8 Days or 6 Years

(5) Net Qualifying Service: (3) - (4) = 24 Years

(6) Last-drawn Salary (BASIC + D.A): Rs. 100,000/-

Gratuity: 100,000/26 x 15 x 24 = Rs. 1,384,615.00, which is limited to the ceiling of Rs. 1,000,000.00 only.

Therefore, Gratuity payable: Rs. 1,000,000/-

Important Notes

(A) Date of resignation is treated as the actual date of termination of employment.

(B) The date of proceeding on LLP is notionally determined as 01-09-09.

(C) Since the resignation was accepted on 26-11-2013, the employment was deemed to have continued up to the date of resignation, and 24-05-2010 is the date of effect of the amendment raising the ceiling limit to Rs. 10 lakh.

Regards

Dear Mr. Solanki,

Based on the details you have provided, the actual amount of gratuity due to you on the date of your resignation [23-10-2013] is calculated as below:

Gratuity Calculation Details

(1) Date of entry into service: 01-04-1984
(2) Date of termination of service: 23-10-2013 [A]
(3) Gross service rendered: 29 Y- 6 M - 22 D OR 30 YEARS
(4) Period not eligible: 01-09-2009 TO 23-10-2013 (LLP) i.e., 05Y-10M-08D OR 6 YEARS [B]
(5) NET Qualifying Service: (3) - (4) = 24 YEARS
(6) Last-drawn Salary (BASIC+D.A): Rs. 100,000/=
Gratuity: 100,000/26 X 15 X 24 = 13,84,615-00 which is limited to the ceiling of Rs. 10,00,000-00 only [C]

Therefore, Gratuity payable: Rs. 10,00,000/=

Notes

[A] Date of resignation is treated as the actual date of termination of employment.
[B] The date of proceeding on LLP is notionally determined as 01-09-09.
[C] Since the resignation was accepted on 26-11-2013, the employment was deemed to have continued up to the date of resignation and 24-05-2010 is the date of effect of the amendment raising the ceiling limit to Rs. 10 lakh.

Respected sir, thank you very much for the guidance you have provided. I will present all the above facts to my employer and request them to clear my gratuity amount of Rs. 1,000,000.00 instead of Rs. 3.5 lakh as proposed by them.

Respected sir, could you please help me send a letter to my employer? If possible, please send me a draft of the proposed letter for my employer.

Thanks and regards,
A. K. Solanki

Legal Notice for Gratuity Payment Dispute

Please let me know what legal notice I can send to my employer regarding the above matter.

1. **Date of Entry into Service:** 01-04-1984

2. **Date of Termination of Service:** 23-10-2013 [A]

3. **Gross Service Rendered:** 29 Y-6 M-22 D OR 30 YEARS

4. **Period Not Eligible:** 01-09-2009 TO 23-10-2013 (LLP) i.e., 05Y-10M-08D OR 6 YEARS [B]

5. **Net Qualifying Service:** (3) - (4) = 24 YEARS

6. **Last-drawn Salary (BASIC+D.A):** Rs.100,000/-

7. **Gratuity Calculation:** Rs.100,000/26 X 15 X 24 = Rs.13,84,615-00, which is limited to the ceiling of Rs.10,00,000-00 only. Therefore, Gratuity payable: Rs.10,00,000/-

Note:

[A] Date of resignation is treated as the actual date of termination of employment.

[B] The date of proceeding on LWP is notionally determined as 08 MAY 2009.

[C] Since the resignation was accepted on 26-11-2013, the employment was deemed to have continued up to the date of resignation.

[D] 24-05-2010 is the date of effect of the amendment raising the ceiling limit to Rs.10 Lac.

My Submissions:

My employer is granting me gratuity of 3.5 LAC only as they are treating my service up to 08 May 2009. Whereas, I was on leave without pay from 08 May 2009 to 23 Oct 2013. My resignation was accepted by the employer on 23 Oct 2013.

Please guide me on who is right - my employer or myself, who is asking the employer to pay Rs. 10 LAC gratuity. If I am correct, please send me advice or I request all to send me a format or draft letter legal notice to be sent to my employer.

Thanks and Regards,

A. K. Solanki

In your case, the only point of dispute is whether you are entitled to the revised maximum amount of gratuity or not. The effective date of the amendment raising the ceiling limit from Rs 3.5 lakh to Rs 10 lakh is 24-05-2010. From 08-05-2009 onwards, you were on LLP on account of sickness. You never rejoined duty afterward but chose to resign and submitted your resignation letter on 23-10-2013, which was accepted by the employer on 26-11-2013. Technically speaking, you have been in service until the date on which your resignation was accepted. If yours is a case of abandonment of service, your employer can accept your later resignation retrospectively with effect from the date you were absent. However, according to you, you were orally permitted to proceed on LLP from 08-05-2009.

Therefore, you are deemed to be in service at least until the date of your resignation, though your entitlement to gratuity can be negated for the period of continuous absence on leave. It would be advisable to engage a counsel who will look after the paperwork and procedural formalities.

Regards