Gratuity as a Reward: How a Labor Court's Decision Impacts Employee Rights and Payments

Gratuity as a Reward: Labor Court's Decision

The labor court in the city recently stated that the gratuity amount is as good as a reward to an employee for their successful completion of service; therefore, it cannot be denied. The court ordered that the Brihanmumbai Electric Supply and Transport (BEST) pay the gratuity with interest to a former employee.

The application had been filed by a former BEST bus inspector before the Controlling Authority under the Payment of Gratuity Act. The applicant had joined the undertaking in 1990 and retired in August last year but was yet to be paid his gratuity of over Rs 9 lakh.

According to his complaint, the BEST was avoiding the payment even after he had sent them a notice. In their response before the authority, the BEST stated that they did not have the jurisdiction to decide the matter as the undertaking has a private scheme for gratuity for its employees. It also stated that it is functioning under financial losses and has obtained loans for its daily functioning. While not refusing to pay up, it stated that it could make part-payment immediately and pay the rest of the amount when funds are available.

Court's Ruling on Interest

Judge Vyas stated in his order, "In the present case, the applicant has been retired in August 2018 but till date has not received the gratuity. The Act has prescribed interest at the rate of 10% per annum if the gratuity has not been paid within a specific period. Therefore, the entitlement of the applicant for the said rate of interest cannot be denied."

Vyas added, "The opponent is directed to pay the applicant an amount of Rs 9,83,858 towards gratuity along with interest at the rate of 10% per annum from 02/08/2018 (date of retirement) until its realization."

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Gratuity as a Reward for Employee Loyalty

Gratuity is a reward for employee loyalty. If an employee stays with a company for over five years, they are entitled to receive gratuity when they retire, resign, or are retrenched. The monetary reward paid by the company in recognition of the employee's years of service is mandated by the Payment of Gratuity Act, 1972.

Most establishments employing 10 or more workers fall under the Act. Roughly, the employee receives half a month's Basic and Dearness Allowance (DA) for every completed year of service as gratuity.

Are You Eligible for Gratuity?

If an employee serves more than six months in the last year of employment, it is considered a full year of service. There are exceptions and legal rulings that relax the five-year continuous service rule. The rule is waived if an employee dies or is disabled. Additionally, the Madras High Court in the Mettur Beardsell case ruled that if an employee completes four years and 240 days in service, they will be eligible for gratuity.