Seeking Advice: How to Claim Gratuity After Nearly 5 Years of Service in a Private Company?

I have completed 4 years, 11 months, and 7 days of continuous service in a private company, and then I joined a new company. However, the company did not provide gratuity to me and informed me that I had not completed 5 years, therefore I was not entitled to gratuity. I also believed this and did not raise my voice. It has been a year now, and I learned from my friends that gratuity can be claimed if someone completes 4 years and 6 months of continuous service in an organization that operates for 5 days a week.

Upon discovering this, I emailed the previous company referencing the rule; they did not respond for several days. After sending continuous reminders, they finally replied to me via email, and the HR department expressed interest in discussing this matter over the phone. However, I responded to their email stating that whatever the reason for denying gratuity, they need to reply to me via email. Unfortunately, they have not responded yet. I reside in Noida. Could you please advise me on how to proceed further to obtain my gratuity?

Thanks in advance.

Regards

Dear Raj,

As per the duration you have mentioned, you seem to be eligible for gratuity payment. You may send them a legal show cause notice asking them why gratuity has been denied to them and why non-compliance should not be raised to statutory authorities, followed by recovery proceedings.

Thanks And Regards,
Compliance First
9769003570

Thank you very much for your prompt reply. Most of the sites do not reply so promptly.

Yesterday, I received an email from the company stating that they have agreed to pay my gratuity. Now that I have raised my voice, they have agreed to pay the gratuity so easily. They have tried to take advantage of ignorant employees, and after raising my voice, they have easily agreed. For a complete year, I used to think that I could have waited for 25 more days to complete my 5 years and receive the gratuity. Now, I want them to pay a price for this by compensating me with a penalty as per the gratuity act.

Provision of Penalty in the Gratuity Act

Can you please guide me on how much provision of penalty there is in the gratuity act?

Calculation of Gratuity Amount

Also, can you please help me calculate the gratuity amount? My basic salary is 23,300, and I do not have any DA component.

Regards, Raj

You are eligible for a gratuity amount of Rs. 67,212/- for 5 years of service. Section 7(3A) of the Payment of Gratuity Act 1972 states that for delays in payment beyond 30 days from the date it becomes payable, the employer is required to pay simple interest at the rates notified by the government unless the delay is due to the fault of the employee.

If an employer fails to pay the due gratuity even after receiving an application in Form-I, the claimant employee or their nominee or legal heir may, within 9 days of the occurrence of the cause for the application, apply to the Controlling Authority for issuing a direction to the employer under Section 7(4) of the Act to release the amount of gratuity payable. After conducting the prescribed inquiry, the Controlling Authority will determine the amount payable and direct the employer to make the payment.

Penalties under The Payment of Gratuity Act

Section 9 (1) of the Act states: Whoever, for the purpose of avoiding any payment to be made under this Act or enabling any other person to avoid such payment of gratuity, knowingly makes or causes to be made any false statement or false representation, shall be punishable with imprisonment for a term which may extend to 6 months, or with a fine which may extend to Rs 1000/-, or with both. An employer who contravenes or makes default in complying with any of the provisions of this Act or any rule or order made thereunder, shall be punishable with imprisonment for a term which may extend to 1 year, or with a fine which may extend to Rs 1000/-, or with both.

However, now that your employer has agreed to make the payment, it is advisable to close the matter in a peaceable manner.

Eligibility for Gratuity

One is eligible for gratuity upon completing 5 years of continuous service. Please check whether you have 5 years of continuous service. If yes, then make an application to your previous employer. The following points are provided for your information to understand the matter:

Section 7(3) casts a duty on employers to determine the amount of gratuity and give a notice in writing to the person to whom gratuity is payable and also to the Controlling Authority specifying the amount of gratuity so determined. Section 7(3) provides for payment of gratuity within 30 days from the date on which it becomes payable to the concerned person. Section 7(3A) provides for interest if gratuity is not paid as provided in subsection 3 of Section 7.

The provision in Section 7(1) cannot be construed as a leverage to deny gratuity to the employee on the specious plea that the person has not applied for gratuity as provided under Section 7(1) in Form I.

Relevant Legal Provisions

Section 7(1) of the Gratuity Act states that an employee who is eligible for payment of gratuity under the Act shall apply in writing to the employer for payment of such gratuity amount. Rule 7(1) of the Payment of Gratuity Rules, 1972 states that the above application shall be made ordinarily within 30 days from the date the gratuity became payable, in Form ‘I’ to the employer.

Further, Section 7(2) of the Act of 1972 states that the employer, whether or not the above application has been made, must determine the amount of gratuity payable and give a notice in writing to the concerned employee and Controlling Authority informing them about such amount.

Rule 8 of the Payment of Gratuity Rules, 1972, states that within 15 days of receipt of application under Rule 7, the employer must give a notice under ‘Form L’ if the claim is found admissible. If the claim for gratuity is not found admissible, the employer shall issue a notice under ‘Form M’ to the employee specifying the reasons why the claim for gratuity is considered not admissible.

Section 7(3) of the Act of 1972 states that the employer shall pay the amount of gratuity so determined, within 30 days from the date it becomes payable to the concerned employee.

Rule 10 of the Payment of Gratuity Rules, 1972 provides that a claimant employee may apply to the controlling authority in writing in ‘Form N’, if the employer either refuses to accept a nomination to entertain an application under Rule 7(1), or having received an application under Rule 7 fails to issue any notice as required under Rule 8. The Controlling Authority may accept any application after the expiry of the specified period for submission of such application, if sufficient cause is shown by the applicant. The Hon’ble Supreme Court in the matter of State of Kerala vs. Padmanabhan Iyer, 1985 has held that delayed payment of gratuity must be considered with the penalty of interest as the current market rate till actual payment.

I'm surprised your company gave in so quickly. Since you have not completed 5 years of service, you are not eligible for gratuity.

Now that you are getting paid, don't try to rake up a legal issue; it will backfire against you.