Employee died and had nominated his mother under the Payment of Gratuity Act. Unfortunately, the mother also died shortly thereafter.

Now the father of the employee claims to be the sole heir. Can the employer release the payment without verification, or is a Succession Certificate required?

From India, Patiala
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If there is any change in the nomination given by the employee in Form F, gratuity will become payable to the legal representative authorized by the legal/succession certificate only.

In case of any dispute, you can remit the amount of gratuity to the Labour Officer who is the appropriate authority under the Payment of Gratuity Act.

Madhu.T.K

From India, Kannur
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I joined KPO Company on 3rd August 2009. I will be relieved from the company on 3rd August 2014, requiring me to complete a 45-day notice period. I have successfully completed 5 years and 1 day of service in a single organization. My question pertains to whether my 5 years of service, which includes 120 days of Loss of Pay (informed and uninformed days), makes me eligible for gratuity as per the Gratuity Act 1972. Please provide my legal documents or a link for reference.

Note: I worked for 278 days in the fourth year, i.e., from 4th to 5th year. Can I submit FORM F?

I seek clarification on how basic gratuity is calculated in our company according to the 1972 Gratuity Act:
1. Upon completing 5 years of service (without loss of pay, i.e., informed and uninformed days in service)
2. Upon completing 5 years of service (with loss of pay, i.e., informed and uninformed days in service)
3. Upon completing 5 years of service, including the notice period (with or without loss of pay, i.e., informed and uninformed days in service)

From India, Bangalore
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If you have worked for 240 days in each year, you are said to have worked for 5 continuous years and are eligible for gratuity. In case during a year you have not worked for 240 days and the loss of pay remained unauthorized, then you will not be eligible for gratuity. This 240 days of working includes all paid leave days, weekly off days, and holidays.

There is no separate treatment with regards to notice period, loss of pay, etc. If eligible for gratuity, you will receive it, and what makes you eligible for gratuity is what I have stated above, i.e., continuous service (without loss of pay/paid days of 240 days in a year) for five years.

Madhu.T.K

From India, Kannur
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Hi Mpratish,

Almost all employers would treat the "unauthorized leave" (loss of pay, unauthorized leave = absent) as a break-in-service. We have no clue from you as to how your LOP days were treated in your service conditions. If they condoned this period and ratified later on as 'part of LOP leave' then you might have a chance to have it reckoned as 'continuous service'. You also mentioned 'informed' and 'uninformed' leave, which requires clarity. Moreover, if it were to be a continuous LOP of 102 days in a single calendar/service year, there is no chance of clocking stipulated 240 days of working days (including holidays) in every year and for 5 years to be eligible for gratuity. Better get these sorted out at your office.

From India, Bangalore
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Dear Seniors,

Greetings of the day!

If a retired person is engaged again in contractual service for consecutive five years, can he be eligible for Gratuity? His age is nearly 66 years. During his actual retirement, he received his due gratuity at the age of 60 years. Now, can he claim it again after completing 5 years in contractual service?

Regards,
Soubhik

From India, Bangalore
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Certainly, yes. Under the Payment of Gratuity Act, there is no age specified, nor is there any bar on employment after superannuation or employment after collecting gratuity. Therefore, if the extended service after superannuation and collecting gratuity till the date of superannuation or new service after retirement exceeds 5 years, naturally, he is eligible to get gratuity again for that extended period or new service after retirement, as the case may be.

For eligibility for gratuity, it is not necessary that one should be on the regular rolls of the company, but it is available to those who are employed on fixed-term contracts.

Please find the two attachments that support the above.

Regards,
Madhu.T.K

From India, Kannur
Attached Files (Download Requires Membership)
File Type: doc Gratuity for service after superannuation.doc (77.5 KB, 575 views)
File Type: docx Gratuity to FTC.docx (17.7 KB, 332 views)

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This is in continuation of what M/S Madhu and Kumar stated regarding the computation of 240 days for the purpose of entitlement to gratuity. For the sake of clarity and ready reference, let me give an extract of "the Statement of Objects and Reasons" of the P.G (Second Amendment) Act, 1984 as hereunder:

"2. The Supreme Court had, in its judgment in the case of Lalappa Lingappa v. Lakshmi Vishnu Textile Mills, Sholapur [1981(1) LLJ.308], held that in terms of the existing definition of "continuous service" in sec.2(c) of the Act, the permanent employees were not entitled to payment of gratuity for the years they remained absent without leave and had actually worked for less than 240 days in a year. It has been represented that the enforcement of this ruling resulted in denial of gratuity to a number of employees, whose short-term absence had remained unregularized due to a lack of appreciation of its significance for the purpose of working out their entitlement to gratuity. It is, therefore, now proposed to amend the definition of "continuous service" suitably and to specifically provide that a period of absence in respect of which no punishment or penalty has been imposed would not operate to interrupt the continuity of service for the purpose of payment of gratuity."

In the light of the above reasons, if we analyze Section 2-A of the Act, it would be easily discernible that ss(1) of sec.2 creates a legal fiction for arriving at the number of days constituting continuous service in any given stretch of the employee's service under the same establishment, inclusive of interruptions that could be treated as non-interruptions. They are: (1) interruption on account of sickness (2) interruption on account of an accident (3) interruption on account of leave (4) interruption on account of absence from duty without leave (not being absence in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules, or regulations governing the employees of the establishment), (5) lay-off (6) strike (7) lock-out and (8) cessation of work not due to any fault of the employee.

Ss(2) specifies the number of days in different stretches of periods in cl (a) and (b) to be deemed as continuous service as per ss(1).

The Explanatory Clause speaks about further interruptions due to other reasons.

Therefore, the leave on loss of pay, whether informed or uninformed, in the absence of any order or service rule treating the same as a break in service, would count for computing continuous service for the purpose of gratuity.

From India, Salem
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Thank you, Mr. Umakanthan, for the detailed clarification on the issue. I forgot to mention that any interruption constituting a break in service (resulting in setting the clock backwards) in anybody's "continuous service" should be as a result of a 'speaking order' passed by the competent authority to that effect, mentioning the reasons therefor and the process with which such order emanated. This has been the rule and practice followed in many big organizations where detailed HR policy, rules, and regulations are in vogue.

At the same time, this rule is very rarely used for the simple reason that such 'breaks' revert the long-serving employees back to 'fresher,' nullifying the service rendered by them. Such breaks are often seen in 'habitual absentees' who are generally known as heavy drinkers, mentally upset, chronically ill, highly indebted, spendthrifts, and so on. Many employers condone such short breaks with LOP provided they are otherwise competent, hardworking, and well-behaved in workplaces, taking a lenient view. We have seen many such persons, especially in PSUs.

From India, Bangalore
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I joined a company on 3-8-2009, and I will be relieved from the company on 3-8-2014, i.e., I need to complete a 45-day notice period. This means I will have successfully completed 5 years and 1 day of service in a single organization. Now, my question is, does the 5 years of service include 105 days of loss of pay (informed and uninformed days)? Kindly explain whether I am eligible for gratuity as per the Gratuity Act 1972. Please send my legal documents or a link.

My attendance record is as follows: in the 1st year, I worked for 331 days, in the 2nd year, I worked for 343 days, in the 3rd year, I worked for 332 days, in the 4th year, I worked for 355 days, and in the 5th year, I worked for 350 days. I had 32 loss of pay days in the 1st year, 21 in the 2nd year, 36 in the 3rd year, 10 in the 4th year, and 6 in the 5th year, totaling 105 loss of pay days in 5 years of service.

Based on my attendance record, could you please confirm whether I am eligible for gratuity or not?

From India, Bangalore
Attached Files (Download Requires Membership)
File Type: xls Attendance.xls (31.5 KB, 98 views)

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An average of 30 loss of pay will not make any difference. Moreover, since you have been on regular rolls and not on casual or daily wages, you will be eligible to gratuity. Madhu.T.K
From India, Kannur
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Dear Mpratish,

The treatment that LOP days should be given depends on the HR/Leave policy of a firm. It also depends, in many firms, on the goodwill, a go-getter, enjoyed by the employees concerned, and ultimately the deciding factor is HODs' recommendation on such availment from case to case basis. I personally feel "uninformed leave" does not warrant a kind treatment from the point of view of the employer and deserves to be treated as absent (except on valid reasons like sudden illness, accident, etc.) which in turn could be amounted to "break-in-service". So I request all our employee friends never, ever venture for "uninformed LOP" as there is always a danger of losing benefits accruing to all of your past services. This is so 'leave itself cannot be taken as an automatic right to avail' of course except in emergencies. It goes without saying 'an unwanted person' cannot complain of discrimination if 'a break-in-service' is meted out in the case of LOP; of course, sometimes the number of days also matters. In these situations, it's good for them to sort them out immediately on rejoining duty after the LOP and ensure it did not result in a break-in-service; otherwise, one has to repent leisurely when they are leaving and face the shock of a problem in F & F settlements.

From India, Bangalore
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As per the Act, gratuity is calculated at the rate of 15 days' pay for every completed year of service. However, there is nothing illegal in paying gratuity at a higher rate. Normally, if there is a settlement with the workers that gratuity will be paid at a higher rate (say, at the rate of 30 days' pay for every year of service for those who complete 20 years), then the employer is bound to pay it at such rates. Many companies pay gratuity at higher rates. Nonetheless, there should be a specific policy, and the policy should describe the length of service and the rate at which the gratuity shall be paid. It should also ensure that the policy will be consistently applied and be made applicable to everybody who qualifies.

Madhu.T.K

From India, Kannur
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I know gratuity will calculate as follows, i.e., basic + da * 15/26 days * number of years worked. My question is, my last working day was 4-8-2014. Now, my basic and da for 4 days are (240 + 86). Will my gratuity be 940 INR, or will it be calculated based on the last withdrawn salary, i.e., 31-7-2014? In that case, my basic and da on the last withdrawn salary are (6250 + 2250), and my gratuity would be 24,519 INR. Kindly clarify my doubt.
From India, Bangalore
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last drawn salary means monthly average and not actually received. If your monthly salary was Rs 8500(6250+2250) then it will be taken into account and not the days worked last month Madhu.T.K
From India, Kannur
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Hi Madhu,

I seek your advice on the matter below - My employment with a US MNC was a fixed-term contract for 3 years on a renewable basis. They set aside the sum for my gratuity and included it as part of my CTC. However, it was never a part of my regular payout.

Upon reaching the end of my third year, the organization chose not to renew my contract and released me. My question is: Since my agreement was not renewed and the gratuity was deducted, can I claim it from my ex-employer?

Thanks and regards

From India, New Delhi
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I don't think that they would have deducted it from your salary but rather they would have shown it as part of CTC. If it is shown as a deduction from your monthly salary, then you can claim it; otherwise, not.

Another important thing that the HR should note while drafting the appointment orders and salary structure of an FTC employee is that if the contract is for a period not exceeding five years, never show the gratuity as part of CTC. In such contracts, it is certain that the employee-employer relationship will come to an end before five years, and in no way will the payment of gratuity arise. If you still show it as part of CTC, it can be questioned, and if the employee files a case, there is every chance that the employee will win it on the ground that the employer has given the wrong message about the package.

This is what happened to Maverick as well. If you share your complete details, we may be able to advise you further on it.

Madhu.T.K

From India, Kannur
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Hi Madhu,

Thank you for your insight. I shared my payslip, and you are correct that they have not been deducting but shown it as my CTC. My argument is that neither was it given to me as a monthly payout, nor was it given to me with my F&F. As an employee, I am at a sheer loss.

Would it be wise for me to pursue this with my employer and, if necessary, take legal action? Your advice will be greatly appreciated.

Thanks and regards,
Maverick

From India, New Delhi
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It will not work because it is payable on a condition and that you have not fulfilled that condition, i.e., the condition that you will work for a minimum period of 5 years. Now another question may arise, that what will happen if the service is terminated? Again, it is a question to be answered with reference to the terms of employment. It is true that showing the gratuity amount as a cost to the company is not a good practice since it lacks transparency. But the practice is to show it. By doing it, we are inviting endless confusions. But the employer's defense will be that if you misinterpret the meaning of CTC as monthly salary, the employer is helpless and on accepting the offer itself you should have studied the offer well and clarified the points where you find ambiguity.

A similar amount which the new generation companies show in the CTC is the loyalty incentives which are payable on serving the company for a certain period. This is a condition of service that will be maintainable also.

Madhu.T.K

From India, Kannur
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An employee was working in the state PSU, and after putting in 3 years of service, he was terminated by the management because he did not have the qualifications required for the position for which he was recruited. The mistake arose due to a lack of clarification by the concerned authority. After 6 months, by an interim order of the Hon'ble HC, he was reinstated. After 5 years, the Hon'ble HC passed its judgment in favor of the management and validated the dismissal order. This order came to the knowledge of the management after 10 years. The management again issued a letter for termination backdated.

An appeal was made by the employee before the Hon'ble SC, which upheld the decision of the HC and also directed the management to pay 10 lakh compensation. Now, the question arises whether he is eligible for the payment of gratuity when his dismissal order has been found legal by the court, and at the same time, he served more than 20 years in the PSU.

From India, Lucknow
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Sir, I think in the Payment of Gratuity Act, 1972, there is only a condition of continuous service for not less than five years. Whether the employment of said person is legal or not appears to be not an important factor. However, much will depend upon as to what are the orders of the Honorable Supreme Court. Whether the compensation of Rs. 10 lakh may be in lieu of said Gratuity, etc. Therefore, I think the employer will also keep in view the contents of Court Orders before contemplating his claims under the above Act.
From India, Noida
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The episode narrated by Ranjanrajan seems quite unfortunate to both the Management and the affected individual. It is also indicative of the legal maxim - "Justice tardive, Justice fautive" - i.e., Justice delayed is justice denied. Normally, the process of appointment is a follow-up one confirming a candidate's selection after verifying all his credentials. But in the given case, the officer took so much time even to seek clarification and came to the belated decision that he was not qualified, and hence the termination that formed the cause of action for the entire litigation dragged for years, subsequently culminating in the question of his entitlement to gratuity for the years he served. Unless the entire text of the final judgment is available, it will not be possible to give an appropriate answer to the question, as rightly observed by Mr. Harsh Kumar.

However, an answer ventured out of the philosophy behind the aspect of payment of gratuity to an employee is also possible in the special backdrop of the case. An unqualified candidate was wrongfully appointed to a post, the fact of which was realized belatedly only by the Management, and hence his services were terminated after three years. Of course, the same was stayed by the Court immediately on the employee's appeal while the main issue was still pending. So the relief of continuation of his service was only of interim nature till the disposal of the main issue, which came to the knowledge of the Management further belatedly for obvious reasons though it was favorable to them. When on further appeal by the employee, the orders of the High Court were confirmed but with a definite relief of a fixed sum of compensation to the employee. I think that there ends the matter.

My personal view, therefore, is as follows:

A) Gratuity is essentially based on two aspects - one is blemishless service, and the other is a certain minimum length of service. When the very appointment itself is wrong due to a lack of essential qualification, the subsequent termination of services based on such wrongful appointments would also be a declaration to the effect that the person was never appointed as such apart from extinguishing the wrong appointment as void ab initio.

B) The compensation fixed on the final orders on appeal puts an end to all claims of terminal benefits, if any.

The views of other friends are solicited.

From India, Salem
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While appreciating the posts of Harsh and Umakanth, I would also like to take it in another angle. Is it due to any mistake or concealment of facts on the part of the employee that he was allowed to work for such a long period? Or don't we find that there was negligence from the management side, resulting in the management failing to get the order of the court in time? Is it due to this negligence that the employee continued? If so, don't we say that gratuity is payable for the service that he had rendered?

Madhu.T.K

From India, Kannur
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Madhu T.K. Sir, thank you for appreciating my posts and views as above. Your encouragement continues to motivate me to participate in discussions on citehr.

However, I would like to submit that, as observed from various detailed judgments of the Honorable Supreme Court/High Courts, the courts in administrative matters, such as the one we are discussing, often close the entire dispute for the future by awarding a lump-sum compensation to the aggrieved employee. This lump-sum compensation may include all claims, such as notice pay, gratuity, leave encashment, etc., in respect of which the aggrieved employee must have made his claims in the petition. I believe that the observations of Mr. Umakanthan M. appear to be important and relevant in this situation.

With regards.

From India, Noida
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