Legal position
Every Employer shall obtain an insurance, for his liability towards payment of gratutity under section 4A of payment of Gratutity Act 1972, form LIC or other prescribed insurance company.
Section 4A is given below in details.
4A. COMPULSORY INSURANCE.
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(1) With effect from such
date as may be notified by the appropriate Government in this behalf, every
employer, other than an employer or an establishment belonging to, or under the
control of, the Central Government or a State Government, shall, subject to the
provisions of sub-section (2), obtain an insurance in the manner prescribed,
for his liability for payment towards the gratuity under this Act, from the
Life Insurance Corporation of India established under the Life Insurance
Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer :
Provided that different dates may be appointed for different establishments or
class of establishments or for different areas.
(2) The appropriate
Government may, subject to such conditions as may be prescribed, exempt every
employer who had already established an approved gratuity fund in respect of
his employees and who desires to continue such arrangement, and every employer
employing five hundred or more persons who establishes an approved gratuity
fund in the manner prescribed from the provisions of sub-section (1).
(3) For the purpose of
effectively implementing the provisions of this section, every employer shall
within such time as may be prescribed get his establishment registered with the
controlling authority in the prescribed manner and no employer shall be
registered under the provisions of this section unless he has taken an
insurance referred to in sub-section (1) or has established an approved
gratuity fund referred to in sub-section (2).
Every employer knows he has to pay gratuity.It is a known financial liability and it is wise to make adequate insurance provision for it.
Employer pays the annual premium and need not then worry about gratuity bulk payment.
He has tax benefits in form of business expense.
Premiums paid become business expense.
Having a group gratuity policy is legally needed and also gives employees a sense of happiness as they know gratuity will be paid without delays.