Can Our Liaison Office Register for Gratuity Benefits for Long-term Employees?

Hi,

We are a Liaison office registered in India since 2000, with no commercial activities. We are now a total of 5 employees and hence do not have PF or Gratuity benefits. Two employees have been working with the company for more than 10 years. I would like to know if we can register for Gratuity benefits and if we will be eligible to receive them.

Kindly reply.

Swarna

Payment of Gratuity Act, 1972:

The Payment of Gratuity Act was passed in the year 1972 and covers employees engaged in mines, factories, oil fields, plantations, companies, ports, and other such establishments which have more than ten employees. In your case, gratuity will not be applicable to those people.

Dear Swarnalatha,

Unlike PF or ESI, the Gratuity Act does not require any registration as such. When a person quits a company and if he/she is eligible for gratuity, the company has to pay the gratuity. Now in your case, legally you are not bound to pay the gratuity. Nevertheless, it would be improper to leave a long-serving employee high and dry. He has served your organization, and now it is your time to acknowledge his services and go beyond the limits of the law to fulfill the employee-friendly practice.

Thanks,

Dinesh Divekar

Please pay gratuity as advised by Mr. Divekar. Just to add one more point, the law does not prevent you from providing more benefits to employees than what is outlined in the law. So please go ahead and pay.

Dear Swarna, as already discussed earlier, the Payment of Gratuity Act 1972 is not applicable to your organization. However, if you wish to pay these loyal employees some amount as ex gratia, you can do so following the guidelines of the PGA Act, i.e., 15 days' salary per completed year of service. This amount is to be paid upon superannuation or separation. There is no legal binding, and there is a gratuity policy from LIC where you can set aside a specified sum each year so that you are not burdened at the end of the tenure of these employees' services. If they have already completed 10 years, you can explore other methods to provide similar benefits.

Thank you.