Query Regarding Gratuity Payment
I have a query regarding gratuity payment. Kindly please help me to make a fair result. Details are as follows:
• Gratuity being part of CTC, every month gratuity is deducted from the employee's salary.
• We formed a trust to maintain a Group Gratuity scheme.
• Now we need to deposit the amount into individual employees' accounts.
Queries
1. Some of the employees absconded or resigned without information, and their gratuity amount lies with the company. Do we need to deposit the amount into the particular employees' accounts?
2. If not required, and the concerned employee is not available, how should that amount be accounted for?
3. Do we need to deposit that balance amount to the labor welfare board?
Please suggest.
Regards,
Hari
From India, Chennai
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1I have a query regarding gratuity payment. Kindly please help me to make a fair result. Details are as follows:
• Gratuity being part of CTC, every month gratuity is deducted from the employee's salary.
• We formed a trust to maintain a Group Gratuity scheme.
• Now we need to deposit the amount into individual employees' accounts.
Queries
1. Some of the employees absconded or resigned without information, and their gratuity amount lies with the company. Do we need to deposit the amount into the particular employees' accounts?
2. If not required, and the concerned employee is not available, how should that amount be accounted for?
3. Do we need to deposit that balance amount to the labor welfare board?
Please suggest.
Regards,
Hari
From India, Chennai
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My answers to your questions are as follows:
01. Handling Gratuity for Absconded/Resigned Employees
Some of the employees absconded or resigned without information, and their gratuity amount lies with the company. Do we need to deposit the amount into the particular employee's account?
Ans01: For absconding employees, you need to take disciplinary action against them and terminate their services by following the due process of the law. After terminating their services, you need to settle their legal dues in full and final, including gratuity. You may send the amount of legal dues to them by cheque at their last known address. If the amount is not encashed by them, you need to show it in the unpaid account.
02. Accounting for Unclaimed Gratuity Amounts
If not required, and the concerned employee is not available, how should that amount be accounted for?
Ans02: Answered in Ans01 above.
03. Depositing Unclaimed Amounts to the Labor Welfare Board
Do we need to deposit that balance amount to the labor welfare board?
Ans03: Yes, you need to deposit the said amount, which is shown in the unpaid account for the past 3 years, with the LWF as unpaid accumulation.
Thank you.
From India, Mumbai
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01. Handling Gratuity for Absconded/Resigned Employees
Some of the employees absconded or resigned without information, and their gratuity amount lies with the company. Do we need to deposit the amount into the particular employee's account?
Ans01: For absconding employees, you need to take disciplinary action against them and terminate their services by following the due process of the law. After terminating their services, you need to settle their legal dues in full and final, including gratuity. You may send the amount of legal dues to them by cheque at their last known address. If the amount is not encashed by them, you need to show it in the unpaid account.
02. Accounting for Unclaimed Gratuity Amounts
If not required, and the concerned employee is not available, how should that amount be accounted for?
Ans02: Answered in Ans01 above.
03. Depositing Unclaimed Amounts to the Labor Welfare Board
Do we need to deposit that balance amount to the labor welfare board?
Ans03: Yes, you need to deposit the said amount, which is shown in the unpaid account for the past 3 years, with the LWF as unpaid accumulation.
Thank you.
From India, Mumbai
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I have a doubt. Is this unpaid amount to be deposited with LWF or the Controlling Authority under the Payment of Gratuity Act? I feel the amount should be deposited with the CA under the Act. Will you please clarify?
Regards
From India, Mumbai
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Regards
From India, Mumbai
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I feel there is no provision in the POG Act about depositing the unpaid gratuity amount with CA under the Act. However, I am confident that unpaid gratuity for 3 years is an unpaid accumulation as defined under LWF. Still, let me check it. Tomorrow, I may not get time to check it. Therefore, I request that you also check it and revert.
Regards,
From India, Mumbai
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Regards,
From India, Mumbai
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I think you have used the wrong words such as "absconding" and "resigned without information" for employees who are leaving the service of their own accord or without intimation. Normally, the word "absconding" is used by the police to describe someone running from the law or capture. Another term used, "resigned without information," is also not appropriate because you cannot resign verbally. Once somebody has submitted their resignation, which has to be in writing, it cannot be considered without intimation. Perhaps you meant to say that they have left the company of their own accord without intimation.
Depositing Unclaimed Amounts
As for the depositing of unclaimed amounts, you need to deposit all payments due to the employee but not made to them within a period of three years from the date on which they became due with the appropriate labor department of your state. The gratuity amount is also covered under the definition of "unclaimed accumulation" under the Labour Welfare Act, as there is no provision under any other act, including the Payment of Gratuity Act, 1972, to deposit the gratuity amount into a particular employee's account. However, before depositing the gratuity amount under the Labour Welfare Act, you need to ensure that you have taken action as envisaged under Section 7 of the Payment of Gratuity Act, 1972.
Regards,
BS Kalsi
From India, Mumbai
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Depositing Unclaimed Amounts
As for the depositing of unclaimed amounts, you need to deposit all payments due to the employee but not made to them within a period of three years from the date on which they became due with the appropriate labor department of your state. The gratuity amount is also covered under the definition of "unclaimed accumulation" under the Labour Welfare Act, as there is no provision under any other act, including the Payment of Gratuity Act, 1972, to deposit the gratuity amount into a particular employee's account. However, before depositing the gratuity amount under the Labour Welfare Act, you need to ensure that you have taken action as envisaged under Section 7 of the Payment of Gratuity Act, 1972.
Regards,
BS Kalsi
From India, Mumbai
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I checked up, and you are right—the definition of 'Unpaid accumulation' under the Bombay Labour Welfare Fund Act means all payments due to employees but not made within a period of three years, which includes gratuity as well. Thus, the amount is to be deposited with the LWB but only after three years. Thank you for giving me an opportunity for an in-depth study of the Labour Welfare Fund Act.
However, I observe that Sub-section (3A) of Section 7 of the POG Act states about seeking permission from the Controlling Authority for non-payment of interest for a delay in payment of gratuity for no fault of the employer; and sub-section 4(a) about depositing the amount with the controlling authority as admitted by the employer in case of a dispute.
Can't the employer take advantage of the situation in the instant case by seeking permission from the CA for non-payment of interest for delayed payment under the plea that the separated employee has not applied for gratuity and the concerned person is not traceable at the last known address? In any case, the deposit with LWB is applicable only after the completion of three years. Please comment.
Regards.
From India, Mumbai
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However, I observe that Sub-section (3A) of Section 7 of the POG Act states about seeking permission from the Controlling Authority for non-payment of interest for a delay in payment of gratuity for no fault of the employer; and sub-section 4(a) about depositing the amount with the controlling authority as admitted by the employer in case of a dispute.
Can't the employer take advantage of the situation in the instant case by seeking permission from the CA for non-payment of interest for delayed payment under the plea that the separated employee has not applied for gratuity and the concerned person is not traceable at the last known address? In any case, the deposit with LWB is applicable only after the completion of three years. Please comment.
Regards.
From India, Mumbai
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Dear Premkumar ji, many thanks for making this discussion interesting to me. I have gone through the POG Act, especially Section 7. I reproduce Subsection 4(a) of Section 7 as given below verbatim:
"If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity."
According to this subsection, the question of depositing the amount with the Controlling Authority arises in the following circumstances:
1. In case of a dispute regarding the amount of gratuity;
2. In case of a dispute regarding the admissibility of any claim; and
3. In case of a dispute regarding the person entitled to receive the gratuity.
Hope the doubt is clear.
From India, Mumbai
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"If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity."
According to this subsection, the question of depositing the amount with the Controlling Authority arises in the following circumstances:
1. In case of a dispute regarding the amount of gratuity;
2. In case of a dispute regarding the admissibility of any claim; and
3. In case of a dispute regarding the person entitled to receive the gratuity.
Hope the doubt is clear.
From India, Mumbai
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These are responses to the comments made by Mr. Kargaonkar. These answers assume that the person concerned has worked for 5 years and is eligible for gratuity. Where the person is not eligible for gratuity, then no amount needs to be paid or deposited with the labor welfare fund. Just because an amount is in CTC or that you provided group schemes for it does not make it payable in law. Your company may decide to pay it on moral grounds, but legally it's not required where gratuity is not payable as per law.
Dear Hari ji, my answers to your questions are as follows:
1. Handling Gratuity for Absconded/Resigned Employees
- **Question:** Some of the employees absconded/resigned without information, whose gratuity amount lies with the company. Do we need to deposit the amount to the particular employee's account?
- **Answer 1:** For absconding employees, you need to take disciplinary action against them and terminate their services by following due process of law. After terminating their services, you need to settle their legal dues in full & final, including gratuity. You may send the amount of legal dues to them by cheque at their last known address. If the amount is not encashed by them, you need to show it in the unpaid account.
2. Accounting for Unclaimed Gratuity
- **Question:** If not required, and the concerned employee is not available, how should that amount be accounted for?
- **Answer 2:** Answered in Answer 1 above.
3. Depositing Unpaid Gratuity to Labor Welfare Board
- **Question:** Do we need to deposit that balance amount to the labor welfare board?
- **Answer 3:** Yes, you need to deposit the said amount, which is shown in the unpaid account for the past 3 years with LWF as unpaid accumulation.
Regards.
From India, Mumbai
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Dear Hari ji, my answers to your questions are as follows:
1. Handling Gratuity for Absconded/Resigned Employees
- **Question:** Some of the employees absconded/resigned without information, whose gratuity amount lies with the company. Do we need to deposit the amount to the particular employee's account?
- **Answer 1:** For absconding employees, you need to take disciplinary action against them and terminate their services by following due process of law. After terminating their services, you need to settle their legal dues in full & final, including gratuity. You may send the amount of legal dues to them by cheque at their last known address. If the amount is not encashed by them, you need to show it in the unpaid account.
2. Accounting for Unclaimed Gratuity
- **Question:** If not required, and the concerned employee is not available, how should that amount be accounted for?
- **Answer 2:** Answered in Answer 1 above.
3. Depositing Unpaid Gratuity to Labor Welfare Board
- **Question:** Do we need to deposit that balance amount to the labor welfare board?
- **Answer 3:** Yes, you need to deposit the said amount, which is shown in the unpaid account for the past 3 years with LWF as unpaid accumulation.
Regards.
From India, Mumbai
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Gratuity and CTC Clarification
I want to inform you that Gratuity is not part of CTC, and Gratuity cannot be deducted from the salary. Gratuity is payable after the completion of 5 years of service. (If 4 years and 6 months can be rounded off to 5 years). You need not pay gratuity either to the employee or deposit it in the labor welfare board. The amount lying in the Gratuity Fund Account is the company's liability, and it should be shown in the company's books. At the time of the renewal of the gratuity account, the sum available in the gratuity account can be adjusted against the premium payable.
Regards,
Meeta
From India, Mumbai
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I want to inform you that Gratuity is not part of CTC, and Gratuity cannot be deducted from the salary. Gratuity is payable after the completion of 5 years of service. (If 4 years and 6 months can be rounded off to 5 years). You need not pay gratuity either to the employee or deposit it in the labor welfare board. The amount lying in the Gratuity Fund Account is the company's liability, and it should be shown in the company's books. At the time of the renewal of the gratuity account, the sum available in the gratuity account can be adjusted against the premium payable.
Regards,
Meeta
From India, Mumbai
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Your response to the queries is very authoritative. You seem to be very confident in your response. I am a member like you, but I still make an attempt to submit to you/ask you with humility as under:
Gratuity and Cost to the Company
Why do you feel that Gratuity is not a part of Cost to the Company?
Gratuity Deduction from Salary
Who said that Gratuity is deducted from Salary? Or have you come across any such deduction?
Gratuity Payable After 5 Years of Service
Your both the sentences are contradictory to each other. What do you mean to say exactly? What is the basis for it?
Gratuity Payment and Labor Welfare Board
Can you please convince us?
Gratuity Fund Account
Can you please convince us what the gratuity A/C is and what is this adjusted?
You became a member of this forum in May 2013, and this was your first posting. I do not want to discourage you and other members who participate in this forum. My humble request to all the members is that they should think twice before responding. They should make their own study before replying. They should read the earlier responses and analyze them.
Each one is free to express his or her views in this forum. But this kind of response creates a different image of the HR fraternity in the rest of the world. This statement is not pinpointed to this thread/discussion but to every such thread/discussion.
If anyone feels that I am harsh here, please condone me. I further request the administrators of the forum to delete this posting of mine immediately if they feel so. I also did not like to respond this way.
Regards.
From India, Mumbai
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Gratuity and Cost to the Company
Why do you feel that Gratuity is not a part of Cost to the Company?
Gratuity Deduction from Salary
Who said that Gratuity is deducted from Salary? Or have you come across any such deduction?
Gratuity Payable After 5 Years of Service
Your both the sentences are contradictory to each other. What do you mean to say exactly? What is the basis for it?
Gratuity Payment and Labor Welfare Board
Can you please convince us?
Gratuity Fund Account
Can you please convince us what the gratuity A/C is and what is this adjusted?
You became a member of this forum in May 2013, and this was your first posting. I do not want to discourage you and other members who participate in this forum. My humble request to all the members is that they should think twice before responding. They should make their own study before replying. They should read the earlier responses and analyze them.
Each one is free to express his or her views in this forum. But this kind of response creates a different image of the HR fraternity in the rest of the world. This statement is not pinpointed to this thread/discussion but to every such thread/discussion.
If anyone feels that I am harsh here, please condone me. I further request the administrators of the forum to delete this posting of mine immediately if they feel so. I also did not like to respond this way.
Regards.
From India, Mumbai
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Kindly note that I have replied stating that I have been handling the gratuity matters for our organization for many years. We have a registered Gratuity trust with LIC.
CTC Components
1. CTC includes - gross total salary, LTA, Medical, and the Employer's share of PF & ESIC.
Gratuity Payment Guidelines
2. As per the Gratuity Act, the gratuity is payable after 5 years. However, after a Supreme Court decision, the gratuity is payable after completing 4 years and 240 days. Previously, it was 4 years and 190 days.
Gratuity and LWF A/C
3. I have never come across a situation where gratuity can be deposited in the LWF A/C. We deposit the bonus in the LWF A/C.
This is what I want to convey. You may feel that I am writing this with authority, but let me inform you that this is based on my total work experience. I do agree that I should write based on views rather than providing a clear-cut explanation.
Regards,
Meeta
From India, Mumbai
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CTC Components
1. CTC includes - gross total salary, LTA, Medical, and the Employer's share of PF & ESIC.
Gratuity Payment Guidelines
2. As per the Gratuity Act, the gratuity is payable after 5 years. However, after a Supreme Court decision, the gratuity is payable after completing 4 years and 240 days. Previously, it was 4 years and 190 days.
Gratuity and LWF A/C
3. I have never come across a situation where gratuity can be deposited in the LWF A/C. We deposit the bonus in the LWF A/C.
This is what I want to convey. You may feel that I am writing this with authority, but let me inform you that this is based on my total work experience. I do agree that I should write based on views rather than providing a clear-cut explanation.
Regards,
Meeta
From India, Mumbai
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I appreciate your response. In this forum, we exchange our views and knowledge with others. No one is perfect, and I am no exception to this. I know that what I know is not ultimate. I try to learn as well as unlearn everything at each step of my life. This forum is a good platform for us to learn and unlearn in our profession. So, do not be discouraged by my response to you. Please continue with your participation.
Comments on Your Post
An employer can include any expense he incurs on an employee. I have seen employers providing uniforms, shoes, gumboots, rainwear, etc., and the expense incurred towards this is taken as CTC. We cannot say that the employer is wrong.
Which decision of the Supreme Court are you referring to? According to my knowledge, there is no decision by the Supreme Court in this regard.
You need to deposit the unpaid gratuity amount lying with you for the past three years with the LWF as per prevailing law. You have a trust under LIC as you mentioned. I am sure there must be some clause in the trust deed/document on unpaid gratuity amounts.
One needs to write clearly and to the point.
Members of the forum, including you, can comment on this.
From India, Mumbai
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Comments on Your Post
An employer can include any expense he incurs on an employee. I have seen employers providing uniforms, shoes, gumboots, rainwear, etc., and the expense incurred towards this is taken as CTC. We cannot say that the employer is wrong.
Which decision of the Supreme Court are you referring to? According to my knowledge, there is no decision by the Supreme Court in this regard.
You need to deposit the unpaid gratuity amount lying with you for the past three years with the LWF as per prevailing law. You have a trust under LIC as you mentioned. I am sure there must be some clause in the trust deed/document on unpaid gratuity amounts.
One needs to write clearly and to the point.
Members of the forum, including you, can comment on this.
From India, Mumbai
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Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc