Gratuity Payment Delays: How Do You Calculate the Interest Period for Forfeited Amounts?

Seniors, please advise:

Recently, the Appellate Authority has ordered the employer to pay the forfeited gratuity amount along with interest at a rate of 10% simple interest from the date of retirement to the date of actual payment.

My query is: what will be the interest period for the computation of interest?

1. From the date of retirement to the date of submission of the forfeited gratuity amount at the controlling authority.
OR
2. From the date of retirement to the date of the Order issued by the Appellate Authority.

Dear Ss.R,

As per Sec. 4(1) of the PG Act, 1972, gratuity shall be payable to an employee on the termination of his employment due to any one of the reasons mentioned therein. It would, therefore, imply that the amount becomes payable on the very date of termination or the next day at the earliest.

Sec. 7(3) of the Act stipulates the maximum permissible grace period for payment as 30 days from the date gratuity becomes payable, i.e., the actual date of termination of employment.

Sec. 7(3-A) imposes interest liability on default of payment from the actual date of termination till the date of actual payment. Therefore, you have to calculate interest effective from the date of termination up to the date of deposit with the C.A.

10% simple interest is too lenient a provision. If an employer has to borrow this amount from the market, the rate will be 24% or more. So, he gains 14% by not paying the gratuity.

An employee has to run from post to pillar, wait for 2/3 years even to get the first favorable order from the Trial Court (Labour Court), engage an advocate, and attend on various dates.

Is there a provision for a penalty besides interest?

Regards,
Abhay Damle