Hi Everybody,
I have always found the suggestions given by seniors and fellow members on Cite HR very useful in grasping the concepts of hrm in the practical sense.
Once again, I need your help in relation to a legal hrm issue. Could seniors please guide me regarding the 'Position of teachers under Payment of Gratuity Act 1972'? We are a leading private educational group employing 1000+ faculty members and at the time of formation of the group, the group policy w.r.t. gratuity was defined as:
"A member who leaves service of the Group on completion of at least 10 yrs of continuous service shall be eligible to payment of gratuity at the rate of half a month of pay last drawn for every completed yr of service subject to a max. of 15 months of pay".
As the requirement of yrs in service has been reduced to 5 yrs some time back and there is some confusion in relation to the position of teachers employed in pvt. educational institutes under 'Payment of Gratuity Act' , thus we felt the need to review our policy in the best interest of all stake-holders.
In relation to status of pvt. Institutes' teachers under the the 'Payment of Gratuity Act ', I got hold on the following information :
"THE PAYMENT OF GRATUITY (AMENDMENT) BILL, 2007"
1.STATEMENT OF OBJECTS AND REASONS
The Payment of Gratuity Act, 1972 (the Act) provides for payment of gratuity to
employees employed in any establishment, factory, mine, oilfield, plantation, port, railway
company or shop employing 10 or more workers.
2.The Central Government had extended the provisions of the Act to the educational
institutions employing 10 or more persons vide this Ministry's notification No. S.O. 1080
dated 3rd April, 1997. The Hon'ble Supreme Court in its judgment dated 13th January, 2004,
in Ahmedabad Private Primary Teachers Association Vs Administrative Officer [AIR 2004
(SC) 1426] held that teachers are not entitled to gratuity under the Act, in view of the fact that
teachers do not answer description of "employee" who are "skilled", "semi-skilled" or
"unskilled". The Supreme Court observed that non-use of wide language similar to definition
of "employee" as is contained in section 2(f) of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952, reinforces the conclusion that teachers are not covered
in that definition. Para 26 of the said judgment reads as follows:—
"Our conclusion should not be misunderstood that teachers although engaged
in very noble profession of educating our young generation should not be given any
gratuity benefit. There are already in several States separate statutes, rules and
regulations granting gratuity benefits to teachers in educational institutions which
are more or less beneficial than the gratuity benefits provided under the Act. It is for
the Legislature to take cognizance of situation of such teachers in various
establishments where gratuity benefits are not available and think of a separate
legislation for them in this regard. That is the subject matter solely of the Legislature
to consider and decide.".
3. Keeping in view the observations of the Hon'ble Supreme Court, it is proposed to
widen the definition of "employee", in order to extend the benefits of gratuity to the teachers,
by amending the same.
4. The Bill seeks to achieve the above objects.
FINANCIAL MEMORANDUM
The Payment of Gratuity Act, 1972 (the Act) provides for payment of gratuity to
employees employed in any establishment, factory, mine, oilfield, plantation, port, railway
company or shop employing ten or more workers. The Bill amends the definition of "employee"
in section 2(e) of the Act so that teachers shall also be entitled for payment of gratuity.
However, in this context I also came across another article which reads as follows:
“There is another Bill which has been introduced in the House of People (Lok Sabha) i.e. ‘The Payment of Gratuity (Amendment) Bill, 2007' in which the term "employee" has been defined as follows: "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of factory, mine, oilfield, plantation, port, railway company, shop or other establishment, to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity. But, till today, no headway has been made in bringing the new legislation.
The ridiculous thing is that though all the teachers discharge same duties, but only the teachers, who are covered under any special statutes, rules and regulations, will get gratuity benefits, especially govt. teachers and those come under Grant-in- aid. This is nothing but the violation of the Art.14 of the Constitution. A classification between unaided and aided teachers does not seem to be reasonable classification as they travel in the same boat for the same purpose. Here, another point to be noted is that members of non-teaching staff of an educational institution are entitled to the gratuity benefit, but teachers are excluded from the same, though, they are working in the same institution. Thus, the teachers working in purely private educational institutions, who are large in number in our country, will be deprived of this gratuity benefit unless these educational institutions extend this benefit to them also. Now, ball is in the court of legislatures. Thus, the attention of the legislature is invited to the matter raised in this judgement for an appropriate legislation. If they are really interested in protecting the teachers, they have to take necessary steps without delay to safeguard the interest of the teachers by bringing an amendment to the Act so as to include these aggrieved people.”
Looking at the information above, I am really confused about the applicability of this act to teachers in pvt. institutes .
Pls. guide me about :
1. What is the exact status of pvt. colleges' teachers under this act? Is this act uniformly applicable to both govt. & private sector teachers irrespective of their wages?
2. If we wish to extend the gratuity benefit to our teachers (even if its not compulsory under the act), then can we frame our own policy in this regard or strict conformation to Gratuity Act is required, because we would like to reach a solution that is acceptable to both the faculty and the top management?
3. Besides, is there any wage or basic pay limit for doling out gratuity benefits because again in this regard, I received very contradictory information, that is:
a.“The Act is not applicable to apprentices and persons holding a post under the Central or State government who are governed by any other rule providing for payment of gratuity.
The Act covers all employees who draw upto Rs. 3500 per month as wages. The maximum gratuity payable is Rs 3,50,000.”
b.“The Act enforces the payment of gratuity, as a statutory retiral benefit. Every employee irrespective of his wages is entitled to receive gratuity if he has rendered continuous service of 5 or more yrs.”
Pls. guide which of the above statements ‘a or b' is valid?
4. Can a pvt. institute teacher with last drawn wages 1 L p.m. claim gratuity benefits as a matter of right or the decision for provision of gratuity to such an employee rests with the employer alone?
Looking forward to your valuable inputs.
From India, Delhi
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21I have always found the suggestions given by seniors and fellow members on Cite HR very useful in grasping the concepts of hrm in the practical sense.
Once again, I need your help in relation to a legal hrm issue. Could seniors please guide me regarding the 'Position of teachers under Payment of Gratuity Act 1972'? We are a leading private educational group employing 1000+ faculty members and at the time of formation of the group, the group policy w.r.t. gratuity was defined as:
"A member who leaves service of the Group on completion of at least 10 yrs of continuous service shall be eligible to payment of gratuity at the rate of half a month of pay last drawn for every completed yr of service subject to a max. of 15 months of pay".
As the requirement of yrs in service has been reduced to 5 yrs some time back and there is some confusion in relation to the position of teachers employed in pvt. educational institutes under 'Payment of Gratuity Act' , thus we felt the need to review our policy in the best interest of all stake-holders.
In relation to status of pvt. Institutes' teachers under the the 'Payment of Gratuity Act ', I got hold on the following information :
"THE PAYMENT OF GRATUITY (AMENDMENT) BILL, 2007"
1.STATEMENT OF OBJECTS AND REASONS
The Payment of Gratuity Act, 1972 (the Act) provides for payment of gratuity to
employees employed in any establishment, factory, mine, oilfield, plantation, port, railway
company or shop employing 10 or more workers.
2.The Central Government had extended the provisions of the Act to the educational
institutions employing 10 or more persons vide this Ministry's notification No. S.O. 1080
dated 3rd April, 1997. The Hon'ble Supreme Court in its judgment dated 13th January, 2004,
in Ahmedabad Private Primary Teachers Association Vs Administrative Officer [AIR 2004
(SC) 1426] held that teachers are not entitled to gratuity under the Act, in view of the fact that
teachers do not answer description of "employee" who are "skilled", "semi-skilled" or
"unskilled". The Supreme Court observed that non-use of wide language similar to definition
of "employee" as is contained in section 2(f) of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952, reinforces the conclusion that teachers are not covered
in that definition. Para 26 of the said judgment reads as follows:—
"Our conclusion should not be misunderstood that teachers although engaged
in very noble profession of educating our young generation should not be given any
gratuity benefit. There are already in several States separate statutes, rules and
regulations granting gratuity benefits to teachers in educational institutions which
are more or less beneficial than the gratuity benefits provided under the Act. It is for
the Legislature to take cognizance of situation of such teachers in various
establishments where gratuity benefits are not available and think of a separate
legislation for them in this regard. That is the subject matter solely of the Legislature
to consider and decide.".
3. Keeping in view the observations of the Hon'ble Supreme Court, it is proposed to
widen the definition of "employee", in order to extend the benefits of gratuity to the teachers,
by amending the same.
4. The Bill seeks to achieve the above objects.
FINANCIAL MEMORANDUM
The Payment of Gratuity Act, 1972 (the Act) provides for payment of gratuity to
employees employed in any establishment, factory, mine, oilfield, plantation, port, railway
company or shop employing ten or more workers. The Bill amends the definition of "employee"
in section 2(e) of the Act so that teachers shall also be entitled for payment of gratuity.
However, in this context I also came across another article which reads as follows:
“There is another Bill which has been introduced in the House of People (Lok Sabha) i.e. ‘The Payment of Gratuity (Amendment) Bill, 2007' in which the term "employee" has been defined as follows: "employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of factory, mine, oilfield, plantation, port, railway company, shop or other establishment, to which this Act applies, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity. But, till today, no headway has been made in bringing the new legislation.
The ridiculous thing is that though all the teachers discharge same duties, but only the teachers, who are covered under any special statutes, rules and regulations, will get gratuity benefits, especially govt. teachers and those come under Grant-in- aid. This is nothing but the violation of the Art.14 of the Constitution. A classification between unaided and aided teachers does not seem to be reasonable classification as they travel in the same boat for the same purpose. Here, another point to be noted is that members of non-teaching staff of an educational institution are entitled to the gratuity benefit, but teachers are excluded from the same, though, they are working in the same institution. Thus, the teachers working in purely private educational institutions, who are large in number in our country, will be deprived of this gratuity benefit unless these educational institutions extend this benefit to them also. Now, ball is in the court of legislatures. Thus, the attention of the legislature is invited to the matter raised in this judgement for an appropriate legislation. If they are really interested in protecting the teachers, they have to take necessary steps without delay to safeguard the interest of the teachers by bringing an amendment to the Act so as to include these aggrieved people.”
Looking at the information above, I am really confused about the applicability of this act to teachers in pvt. institutes .
Pls. guide me about :
1. What is the exact status of pvt. colleges' teachers under this act? Is this act uniformly applicable to both govt. & private sector teachers irrespective of their wages?
2. If we wish to extend the gratuity benefit to our teachers (even if its not compulsory under the act), then can we frame our own policy in this regard or strict conformation to Gratuity Act is required, because we would like to reach a solution that is acceptable to both the faculty and the top management?
3. Besides, is there any wage or basic pay limit for doling out gratuity benefits because again in this regard, I received very contradictory information, that is:
a.“The Act is not applicable to apprentices and persons holding a post under the Central or State government who are governed by any other rule providing for payment of gratuity.
The Act covers all employees who draw upto Rs. 3500 per month as wages. The maximum gratuity payable is Rs 3,50,000.”
b.“The Act enforces the payment of gratuity, as a statutory retiral benefit. Every employee irrespective of his wages is entitled to receive gratuity if he has rendered continuous service of 5 or more yrs.”
Pls. guide which of the above statements ‘a or b' is valid?
4. Can a pvt. institute teacher with last drawn wages 1 L p.m. claim gratuity benefits as a matter of right or the decision for provision of gratuity to such an employee rests with the employer alone?
Looking forward to your valuable inputs.
From India, Delhi
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For point 1 – please refer to the attachment. Though it is not from the gazette/notification, it may help you track the progress. (Winter session has already begun!)
For point 2 – You may have policies of your own in this regard.
For point 3 – My knowledge/exposure says that (b) is correct.
For point 4 – Presently at the discretion of the employer alone.
Please give feedback.
From India, New Delhi
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For point 2 – You may have policies of your own in this regard.
For point 3 – My knowledge/exposure says that (b) is correct.
For point 4 – Presently at the discretion of the employer alone.
Please give feedback.
From India, New Delhi
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Dear Friend,
The apex court has clearly stated that teachers are not covered under this Act. Based on this, a bill is pending. Please note that a bill is not enforceable until it becomes an Act. Furthermore, with regard to voluntary coverage, you must provide coverage to your employees as per the Act only if they are voluntarily covered.
Regards
From India, Vadodara
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The apex court has clearly stated that teachers are not covered under this Act. Based on this, a bill is pending. Please note that a bill is not enforceable until it becomes an Act. Furthermore, with regard to voluntary coverage, you must provide coverage to your employees as per the Act only if they are voluntarily covered.
Regards
From India, Vadodara
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Thank you, Mr. Parekh and Mr. Singh, for your kind advice. However, I am still unclear about whether strict adherence to the existing Act, in terms of the minimum number of years in service, is required if we formulate our Group policy on the payment of gratuity to teachers who are not yet eligible to receive gratuity benefits due to the provision not being enforced by the Act to date. Can we continue with our policy until the government extends this benefit to private institutes' teachers and then adjust our 'Gratuity policy' in accordance with the government rules once the Act in this regard becomes enforceable? Please clarify the aforementioned doubt.
From India, Delhi
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From India, Delhi
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Dear Neha,
I really appreciate your concern and the effort you have put into researching this topic, setting a good example for being a conscientious HR professional who continues to learn and update one's skills and knowledge.
In the light of the above statement, I would like to ask you the following:
- Why should a good organization try to stick to the minimum possible, as provided in any act?
- Is there any penalty for providing any additional or enhanced benefits than what is required by law?
- Did not the Tatas provide the best examples of corporate responsibility when they initiated many welfare measures, even before they were conceived by any statutes?
- The world over, good organizations provide better benefits than those provided in the acts. In fact, this is an indicator of being a good organization.
Please convince your management, whether by law or not, that they can offer better benefits to their employees and set an example for others to follow.
I hope that what I have written makes some sense.
Warm regards.
From India, Delhi
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I really appreciate your concern and the effort you have put into researching this topic, setting a good example for being a conscientious HR professional who continues to learn and update one's skills and knowledge.
In the light of the above statement, I would like to ask you the following:
- Why should a good organization try to stick to the minimum possible, as provided in any act?
- Is there any penalty for providing any additional or enhanced benefits than what is required by law?
- Did not the Tatas provide the best examples of corporate responsibility when they initiated many welfare measures, even before they were conceived by any statutes?
- The world over, good organizations provide better benefits than those provided in the acts. In fact, this is an indicator of being a good organization.
Please convince your management, whether by law or not, that they can offer better benefits to their employees and set an example for others to follow.
I hope that what I have written makes some sense.
Warm regards.
From India, Delhi
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Hi Neha, If an organization wants to provide benefits to its employees even if the statute does not require them to do so, it is free to provide benefits. If you wish to extend the benefit of gratuity payment to employees who are not covered under the act, you can. In this case, you need not follow the guidelines framed under the act. However, you should ensure that there is parity in benefits and considerations thereunder (years, amount, etc.) between those covered and those out of the purview of the act. If you wish to extend the benefit to teachers, you should consider following the norms for them because, if the amendment gets through, it will apply to teachers with a 5-year condition (and other such conditions). Hope I have understood your question properly and have done justice to it by my reply.
Regards, Hiten
From India, New Delhi
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Regards, Hiten
From India, New Delhi
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Thank you, Raj Sir, for the motivating words. I completely agree with you that a good organization can always aim to provide enhanced benefits to its employees. However, sometimes as HR professionals, we must settle for the 'best possible' policies and benefits rather than the 'best,' considering the feasibility in relation to organizational constraints beyond our control.
Your statements certainly make sense, Sir! I will surely try to convince the top management as per your suggestion. To effectively persuade them, I first need to familiarize myself with all aspects and potential alternatives in this case. This way, a lack of information won't hinder us from reaching a proper solution.
From India, Delhi
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Your statements certainly make sense, Sir! I will surely try to convince the top management as per your suggestion. To effectively persuade them, I first need to familiarize myself with all aspects and potential alternatives in this case. This way, a lack of information won't hinder us from reaching a proper solution.
From India, Delhi
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Dear Neha,
If the intended law is made applicable and your scheme is better than that, then the better will prevail. Otherwise, you will have to amend the scheme to be within the framework of the law suitably.
HC. Subbaramu
Bangalore
From India, Kochi
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If the intended law is made applicable and your scheme is better than that, then the better will prevail. Otherwise, you will have to amend the scheme to be within the framework of the law suitably.
HC. Subbaramu
Bangalore
From India, Kochi
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Regarding the 'Position of teachers under Payment of Gratuity Act 1972', just a few days back, a bill to this effect has been passed by Parliament, and it is to be effective with a retrospective date. As soon as a notification to this effect is issued, all educational institutions governed by the said Act will be covered, and teachers shall be eligible to claim gratuity as per the Payment of Gratuity Act, 1972.
S.C. Verma
From India, Delhi
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S.C. Verma
From India, Delhi
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Gratuity Act-Teachers-Ma dhya Pradesh.docx
Payment of Gratuity Act, 1972 & The Rules.ppt