Hiring Retired Employees: What Are the Rules for PF and Gratuity?

Dear All,

If we want to hire an employee after retirement, will the following things be applicable to him:

1. An employee retires from the company and withdraws his PF & Gratuity; can we still consider him for regular employment?
2. If we hire him on a regular employment basis, do we need to deduct PF from his monthly salary?
3. Will he be eligible for Gratuity again?

Please let me know if there are any provisions for the same.

Best Regards,
Sunil

Gratuity and EPF Act stipulates retirement at 58 years, and hence a retiree may not be eligible for benefits under these acts. With regard to employment, you can place them on a consolidated salary roll for a period of one year. There is no provision of law applicable for the extension of services after 58 years of age.

Thank you for your message. Let me know if you need any further assistance.

Dear Sunil, I beg to differ from our learned friend Kumar. No law prescribes the age of superannuation or prohibits the extension of services or reemployment of an employee after retirement from the organization. These matters are determined by the service regulations of the individual organization.

Gratuity under the Payment of Gratuity Act, 1972

If the services of the employee are extended beyond the age of superannuation, or if he is re-employed continuously without any break, gratuity can be paid whenever his services are terminated later. Otherwise, the employer can allow the employee to retire upon reaching the age of superannuation, pay him gratuity, and consider subsequent service as a new one, paying gratuity when the conditions for payment are met.

Pension payment considerations

In my opinion, concerning pension payment, only the age limit for contribution to the EPF is restricted to 58 years of age. It does not prohibit employment beyond 58 years of age.

Provident Fund Considerations for Retired Employees

Regarding the Provident Fund, the law states that if you employ an individual who is already a Provident Fund pensioner and has withdrawn the PF accumulations, you can consider them an excluded employee. However, if the individual is transitioning from an establishment not covered by the EPF & MP Act or from government service, they should be included in the PF coverage in your establishment, even if they are 58 or 60 years old. They may receive a government pension but not a PF Pension. Those excluded are individuals who have withdrawn PF accumulations upon reaching the age of 55 or are PF pensioners. Therefore, it is essential to determine the category this person falls under.

An employee who has reached 58 years of age shall not be covered by the Pension Fund. The employer's contribution of 12% should be directed to the Provident Fund without splitting it as 8.33% to the Pension Fund and the remaining 3.67% to the Provident Fund. Additionally, the employer must pay the EDLI contribution at the prescribed rate of 0.5%.

Regards,
Madhu T K