Can Employers Legally Offer Less Gratuity and Block Legal Action? Seeking Advice

Dear Sirs,

Please advise if any employer can bypass the gratuity act and settle for less than 50% of the actual eligibility by citing their internal rule/agreement. Can an employer prevent an employee from taking legal action for settling for less than the eligible amount and incorporate a clause in their settlement letter that the employee cannot take any legal action? Your valuable comments are appreciated.

Regards,
Arbind

I would like to draw your attention to Section 14 of the Payment of Gratuity Act, 1972, which clearly states that the provisions of the Act and the Rules made thereunder have an overriding effect over the provisions of any other law, rules, contract, or instrument in relation to the subject matter of gratuity. Therefore, an emphatic no is the answer to your first query.

The right to gratuity is a legal right conferred by the Payment of Gratuity Act, 1972, on an employee, and as such, it cannot be curtailed by means of any other instrument.

Regards

Employers cannot evade the responsibility to pay as per the Payment of Gratuity Act 1972. The legal right to gratuity cannot be curtailed by any agreement or clause in the appointment letter.

If the employee willingly accepts a gentleman's agreement for a lesser amount of gratuity with an understanding that he will not approach the court of law for the balance of gratuity, it can be settled internally.

However, if the employee decides to pursue the balance amount of gratuity in court after receiving the initial 50%, then you will be required to pay the remaining balance.

Please take all of these factors into consideration.

Dear Mr. Umakanthan and Mr. Gurumurthy,

Thank you very much for your valuable advice. I will take up the matter with my employer for the settlement of the balance amount.

With kind regards,