Gratuity Policy Dilemma: How to Handle Employee Concerns About Salary Deductions?

Gratuity Policy Concern

My organization is 3 years old and has more than 40 employees, and we do not have a Gratuity Policy in place. No forms of gratuity have been filled yet. Neither the management is willing to deduct the gratuity, nor are the employees willing to accept a deduction for gratuity, as it will affect the in-hand salary, and the attrition rate is very high.

Even if I get the forms filled now, I cannot recover the gratuity amount for the past, and I also won't be able to deduct for the future. I would also like to add that we are not deducting PF and have got PF Declaration Form 11 signed by the employees, as they don't want any deductions in their in-hand salary. Please advise on the gratuity concern.

Understanding Gratuity Obligations

Neither the management would be willing to deduct the gratuity, nor would employees be willing to have deductions for gratuity. Gratuity is to be paid by the management to entitled employees upon exit from the company. It is the responsibility of management to arrange funds from their own sources or by taking out a suitable insurance policy. Employees are not to be subjected to any deductions for gratuity; even if included in the CTC, no deduction is legally authorized from employees' pay. Please take the time to read the Payment of Gratuity Act, 1972. Be more informed and act accordingly.

Compliance with PF Acts

The company falls under PF acts, and PF deductions are needed. Please cross-check the rules. Violation of welfare laws can be a costly affair. Consult a labor lawyer to find out all the compliance requirements.

I would earnestly request you to first go through the Payment of Gratuity Act, 1972, and the Rules, and then the various threads on this site pertaining to gratuity. The PGA, 1972, is a complete code in itself regarding the subject matter of gratuity for industrial employees. Nowhere does the Act require contributions from employees, nor does it grant employers the discretion to deny gratuity to their employees once the Act applies to the establishment. Overall, your post sounds somewhat defiant to the laws of the land based on the untenable reason of a lower take-home salary.