Somebody brought this up recently. Please let me know if any of you know details of the same.
"Gratuity cannot be treated as part of Cost to Company calculations" - recent Supreme Court judgment. If any of you have a copy of the judgment, please forward references; I will be obliged.
Thanks,
Mohit
From India, Ludhiana
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3"Gratuity cannot be treated as part of Cost to Company calculations" - recent Supreme Court judgment. If any of you have a copy of the judgment, please forward references; I will be obliged.
Thanks,
Mohit
From India, Ludhiana
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I have not been able to find the judgment on the net and am not sure if this kind of judgment has been given (tried looking in the news section of major newspapers as well).
By the way, the brief of the Gratuity Act is given below. I think that even if the Supreme Court gives a verdict, in actual practice, the company will definitely count it as a cost to the company as it is a statutory requirement, and the company actually spends money that can be attributed to the employee's personal welfare.
Gratuity is a benefit mandated under the Payment of Gratuity Act, 1972 (The Gratuity Act), and the employer is under a statutory obligation to pay gratuity to their employees under the stipulated conditions. However, the benefit is largely unregulated except for the provisions in the Income Tax Act, 1961 (the IT Act) if the employer had set up a Gratuity Fund approved by Income Tax Authorities.
The Gratuity Act is currently enforced by the Labor Commissioners of the respective state governments. This leads to differential regulations. As per Section 4A of the Gratuity Act, each State can notify the clauses for exemption from an insurance policy in their way.
Gratuity is a retirement benefit and needs to be administered differently than other labor legislations like the Factories Act, Payment of Wages Act, etc.
Superannuation is a Voluntary Occupational Pension Scheme adopted by employers. There is no legislation of a regulatory body for these plans other than the Income Tax Department.
Employers who wanted to fund and institutionalize either the Gratuity or Superannuation scheme had two options. One was to approach the Life Insurance Corporation of India (LIC), the state life insurance monopoly until the other day, for a group insurance product, and the second alternative was to administer a trust with employee and employer trustees. While employer-run pension schemes can accumulate and invest funds, they are required to purchase annuities on behalf of the retiring employees from LIC.
From India, Ahmadabad
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By the way, the brief of the Gratuity Act is given below. I think that even if the Supreme Court gives a verdict, in actual practice, the company will definitely count it as a cost to the company as it is a statutory requirement, and the company actually spends money that can be attributed to the employee's personal welfare.
Gratuity is a benefit mandated under the Payment of Gratuity Act, 1972 (The Gratuity Act), and the employer is under a statutory obligation to pay gratuity to their employees under the stipulated conditions. However, the benefit is largely unregulated except for the provisions in the Income Tax Act, 1961 (the IT Act) if the employer had set up a Gratuity Fund approved by Income Tax Authorities.
The Gratuity Act is currently enforced by the Labor Commissioners of the respective state governments. This leads to differential regulations. As per Section 4A of the Gratuity Act, each State can notify the clauses for exemption from an insurance policy in their way.
Gratuity is a retirement benefit and needs to be administered differently than other labor legislations like the Factories Act, Payment of Wages Act, etc.
Superannuation is a Voluntary Occupational Pension Scheme adopted by employers. There is no legislation of a regulatory body for these plans other than the Income Tax Department.
Employers who wanted to fund and institutionalize either the Gratuity or Superannuation scheme had two options. One was to approach the Life Insurance Corporation of India (LIC), the state life insurance monopoly until the other day, for a group insurance product, and the second alternative was to administer a trust with employee and employer trustees. While employer-run pension schemes can accumulate and invest funds, they are required to purchase annuities on behalf of the retiring employees from LIC.
From India, Ahmadabad
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Some companies cut corners when giving an offer to a candidate by including gratuity amount in the breakup of salary offered. The analogy being that if the company spends, it's your income and thus it is to be included in the CTC, i.e., the package offered to the new employee. This is not only misleading but unethical too. I have myself been a victim of the said practice. Gratuity is paid only upon leaving the company after at least 5 years of employment. If one resigns within five years, they get nothing, and thus, the company has not paid as promised in the breakup of the package offered at the time of joining the company.
If gratuity is included in the breakup of the package offered, then the company should pay the same to the employee irrespective of whether the employee completes 5 years or not; otherwise, it is a breach of contract. However, employees mutely accept this injustice because one person cannot fight the corporate. Besides, in the appointment letter, only the basic salary is mentioned, and the other components are "as per the rules of the company."
HR professionals should NOT indulge in these types of malpractices and injustices towards the employees.
Bharat
From India, Mumbai
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If gratuity is included in the breakup of the package offered, then the company should pay the same to the employee irrespective of whether the employee completes 5 years or not; otherwise, it is a breach of contract. However, employees mutely accept this injustice because one person cannot fight the corporate. Besides, in the appointment letter, only the basic salary is mentioned, and the other components are "as per the rules of the company."
HR professionals should NOT indulge in these types of malpractices and injustices towards the employees.
Bharat
From India, Mumbai
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