Can an Advocate Represent Employers in Gratuity Payment Disputes? Seeking Advice

Received notice from the Controlling Authority under the Payment of Gratuity Act regarding the short payment of gratuity to an employee. Can an advocate represent the employer in the appearance before the Controlling Authority?

Yes, you can engage an advocate to file a counter statement to the claim through him, and he will conduct the case on your behalf.

Have you cross-checked the correctness of the amount paid? If there is an error on your side, it is better to pay up rather than defending something that may not be correct.

Gratuity Payment and Calculation

To whom do we pay the gratuity? We pay the gratuity to the eligible employee. In addition to the eligibility, there is a proper formula to calculate the gratuity. Now the question arises, whether for the short payment, did the ex-employee approach you, and if yes, then did you prove the correctness of your calculation? I doubt whether the employee has approached the labor official directly without approaching you. If your calculations are correct, then there is no need to hire a lawyer as such. You too can go to the labor office and present your case.

Controlling Authority and Gratuity Calculation

Secondly, the "controlling authority" that has given you the notice must have calculated the gratuity. Have they mentioned their amount in the letter? What is the difference? Did you ponder over the difference as to what could be the cause of that difference? The formula for gratuity is: Last drawn salary (basic salary plus dearness allowance) x (number of completed years of service) x (15/26).

According to this formula, the time period of over six months or more is considered as one year. I feel that the difference in amount could be arising because of different basic salary and DA being considered or different years of service being considered. You can do the reverse calculations on your own and find out the cause of the difference.

Thanks,

Dinesh Divekar

Taking the present discussion further on the lines indicated by our learned friends M/s Nathrao and Dinesh, I would like to add the following about the possible reasons for disputed gratuity claims under the Payment of Gratuity Act, 1972:

Relating to the length of continuous service:

Normally, some employers might be under the wrong impression that an employee's continuous service for the purpose of gratuity counts from the date of regularization or the date on which they get enrolled under the EPF Scheme. Hence, they may omit the temporary service such as casual labor, trainee, probationer, etc. This is not correct in view of the deeming provisions of Section 2-A of the PG Act, 1972, defining "Continuous Service" for the purpose of gratuity under the Act.

Change in the constitution of the establishment subsequent to the appointment of the employee:

The subsequent change in the constitution of the establishment, like sole proprietorship being converted later into a partnership or private limited company being turned into a public limited company, etc., are mere cosmetic changes and as such, cannot affect the continuity of the services of the employees who serve all along. Similarly, in the case of transfer of undertakings, the liability to pay gratuity for the services rendered immediately before the transfer gets shifted to the buyer if not mentioned in the transfer deed.

Periods of unauthorized absence:

Any period of unauthorized absence should be treated as a break in service as per the Standing Orders or the Service Regulations applicable. If not, such periods should be taken into account for the purpose of continuous service. Similarly, the period of suspension, if any, undergone pending enquiry, should be taken into account for computing continuous service if it was not treated as punishment in the disciplinary proceedings.

Wages last drawn:

Last drawn wages or salary means not exactly what was received at last but the rate at which the last salary is payable. When the last drawn salary comprises different components, only those of basic and dearness allowance have to be taken for the purpose of calculation of gratuity under the Act. If it is consolidated, the entire amount should be taken into account. It also implies that matters of non-payment at the statutory minimum rates of wages or revised rates consequent on the revision of wages with retrospective effect may lead to disputes later.

Withholding of Gratuity:

The gratuity amount payable under the PG Act, 1972, cannot be withheld or adjusted under any circumstances other than those mentioned in section 4(6) of the Act.

Therefore, any employer facing such a dispute under the Payment of Gratuity Act, 1972, should cross-check the payment, if any already paid, and ensure such lapses have not occurred either by oversight or by misinterpretation.

Understanding Gratuity as a Welfare Measure

Gratuity is a welfare measure designed to help employees achieve financial stability when leaving a job or retiring. Employers need to consider this expenditure in their overall financial planning. Attempting to save a few thousand on gratuity can lead to legal proceedings, damage to reputation, and dissatisfaction. If an employee is entitled to gratuity, it should be paid without seeking excuses to deny rightful payments.

Employers are advised to engage with LIC or another insurance company to subscribe to a group gratuity fund. This allows the insurance provider to handle payments as required. While it's important to run your business efficiently, it should not come at the expense of cutting employee welfare payments.

Dear Mr. Gurmeet,

FORM A - Notice of Opening

FORM B - Notice of Change of Establishment

You have to find out the Jurisdictional Controlling Authority - Assistant Labour Commissioner in relation to your establishment. There is no controlling authority for the entire Karnataka. You have to find out the respective ALC under whose jurisdiction your establishment comes.

Hi Uma,

I have certain queries regarding the punitive suspension policy when it comes to calculating continuity of service. If this is going to be a blanket rule, won't all companies start abusing the system to deprive employees of social security benefits?

I have observed situations where companies suspend employees for trivial reasons such as a dissatisfied client or just to appease their business partners. Doesn't the law clearly state that the punishment should be for riotous behavior that resulted in monetary damage to the company? Otherwise, everyone could potentially bypass the law by issuing two-day suspensions on a rotational basis to each employee.

When an employee has already endured several days without pay simply to appease someone's ego, isn't it excessive to further deprive them of social security benefits by discounting their continuity for gratuity calculations? If the year in question meets the minimum required number of days, shouldn't it be considered a full year in terms of continuity?

Thank you.