Hi all,
I wanted to understand if it is mandatory to have a trust for Gratuity. We are a 100-people software development company. We don't have a gratuity trust as such, but we pay gratuity to our employees who have worked for a minimum of three years with us (upon their exit).
Regards,
CJ Patel
cjpatel@hotmail.com
From India, Bangalore
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I wanted to understand if it is mandatory to have a trust for Gratuity. We are a 100-people software development company. We don't have a gratuity trust as such, but we pay gratuity to our employees who have worked for a minimum of three years with us (upon their exit).
Regards,
CJ Patel
cjpatel@hotmail.com
From India, Bangalore
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Dear Mr.Patel It is not mandatory for the employer to form a trust for Gratuity With regards
From India, Madras
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181From India, Madras
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Dear Mr. Patel,
As Mr. Harikrishnan has stated above, it is not mandatory for the employer to form a trust for gratuity. Since your company employs approximately 100 employees, according to the provisions of the Payment of Gratuity Act, it is mandatory for the employer to pay gratuity to an employee who has completed 5 years of service with the employer. The company can obtain a policy for the benefit of gratuity from the Life Insurance Corporation of India to avoid further liability for the employer.
From India, Gurgaon
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As Mr. Harikrishnan has stated above, it is not mandatory for the employer to form a trust for gratuity. Since your company employs approximately 100 employees, according to the provisions of the Payment of Gratuity Act, it is mandatory for the employer to pay gratuity to an employee who has completed 5 years of service with the employer. The company can obtain a policy for the benefit of gratuity from the Life Insurance Corporation of India to avoid further liability for the employer.
From India, Gurgaon
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Thank you, Mr. Harikrishnan and Mukesh, for the quick response. We are currently paying gratuity to employees who have worked with us for a minimum of three years. However, we do not have any policy with either LIC or any other agencies managing the Gratuity Funds. Is that acceptable?
Regards,
CJ Patel
From India, Bangalore
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Regards,
CJ Patel
From India, Bangalore
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Dear Mr. Patel,
Any rule or regulation formulated by the employer for the payment of gratuity that is more beneficial than the provisions of the Payment of Gratuity Act is valid and legal. In your case, the minimum service to be rendered by the employee is three years, which is less than the five years prescribed by the Payment of Gratuity Act. Therefore, there is nothing illegal in this. However, your scheme or rule or regulations should not be contrary to the provisions of the Payment of Gratuity Act regarding other conditions like the time of payment, circumstances under which gratuity could be forfeited, etc. If it is, then only those conditions/provisions which are less favorable than the provisions of the Payment of Gratuity Act will not be applicable, though the three-year rule will continue to be in force.
With regards,
From India, Madras
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Any rule or regulation formulated by the employer for the payment of gratuity that is more beneficial than the provisions of the Payment of Gratuity Act is valid and legal. In your case, the minimum service to be rendered by the employee is three years, which is less than the five years prescribed by the Payment of Gratuity Act. Therefore, there is nothing illegal in this. However, your scheme or rule or regulations should not be contrary to the provisions of the Payment of Gratuity Act regarding other conditions like the time of payment, circumstances under which gratuity could be forfeited, etc. If it is, then only those conditions/provisions which are less favorable than the provisions of the Payment of Gratuity Act will not be applicable, though the three-year rule will continue to be in force.
With regards,
From India, Madras
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Formation of a gratuity trust or gratuity insurance policy from an insurance company is a way to mitigate the risks involved and fulfill the financial and legal obligations under adverse situations as well, though they are not mandatory.
Imagine a situation: a company with 1000 employees, where 60% of them have completed 5 years of service. In normal circumstances, the company may be required to pay gratuity to 10 to 15 employees every year. Due to favorable economic or business situations, the company has no problem settling these gratuity claims. However, envision a scenario where due to losses or unfavorable economic and market situations, the company has to downsize or close down. In such cases, there will be a need for substantial funds to settle gratuity claims for many employees at once. Under such circumstances, a trust or policy helps in settling claims without any problem or delay.
From India, Pune
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Imagine a situation: a company with 1000 employees, where 60% of them have completed 5 years of service. In normal circumstances, the company may be required to pay gratuity to 10 to 15 employees every year. Due to favorable economic or business situations, the company has no problem settling these gratuity claims. However, envision a scenario where due to losses or unfavorable economic and market situations, the company has to downsize or close down. In such cases, there will be a need for substantial funds to settle gratuity claims for many employees at once. Under such circumstances, a trust or policy helps in settling claims without any problem or delay.
From India, Pune
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Dear CJ,
Greetings for the day.
Mr. Hari and Mr. Mukesh are correct. However, for the payment, 5 years of continuous service is required, with each year consisting of 240 days of work. Only then should the payment be possible.
Thanks and regards,
Sumit Kumar Saxena
9899669071, 0120-4131277
From India, Ghaziabad
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Greetings for the day.
Mr. Hari and Mr. Mukesh are correct. However, for the payment, 5 years of continuous service is required, with each year consisting of 240 days of work. Only then should the payment be possible.
Thanks and regards,
Sumit Kumar Saxena
9899669071, 0120-4131277
From India, Ghaziabad
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Dear Mr. Sumit Kumar Saxena,
In the establishment referred to by Mr. Patel, the condition of five years of continuous service to become eligible to receive gratuity has been modified in favor of the workers to three years. If the employer is willing to pay gratuity to an employee even if they have only completed three years of continuous service, then the law will not prevent it from happening.
With regards
From India, Madras
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In the establishment referred to by Mr. Patel, the condition of five years of continuous service to become eligible to receive gratuity has been modified in favor of the workers to three years. If the employer is willing to pay gratuity to an employee even if they have only completed three years of continuous service, then the law will not prevent it from happening.
With regards
From India, Madras
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Dear Friends,
One of my colleagues, who has recently joined us, worked with her previous employer from 1st September 2006 to 15th June 2011.
Please let me know if she is eligible for gratuity, and if so, could anyone please send me the rules under the Gratuity Act.
Thanks,
grettapl
From India, Mumbai
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One of my colleagues, who has recently joined us, worked with her previous employer from 1st September 2006 to 15th June 2011.
Please let me know if she is eligible for gratuity, and if so, could anyone please send me the rules under the Gratuity Act.
Thanks,
grettapl
From India, Mumbai
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Dear sir,
I worked with your ex-employer for 4 years and 10 months (from September 2001 to August 2006). For the first two years, from September 2001 to September 2003, I was in the training period. The company also deducted PF from my salary during this period. In September 2003, I was confirmed as a permanent employee in the company. However, the company is refusing or unwilling to pay the gratuity that is due to me.
Please help me in this regard.
Thank you.
From India, Madras
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I worked with your ex-employer for 4 years and 10 months (from September 2001 to August 2006). For the first two years, from September 2001 to September 2003, I was in the training period. The company also deducted PF from my salary during this period. In September 2003, I was confirmed as a permanent employee in the company. However, the company is refusing or unwilling to pay the gratuity that is due to me.
Please help me in this regard.
Thank you.
From India, Madras
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It is not mandatory to have a Gratuity Trust. However, there are definite benefits to opt for a Trust with the LIC.
As per the Payment of Gratuity Act, Gratuity is payable to employees who have put in continuous service of 5 years or more. This qualifying criteria does not apply in case of death. For a complete understanding of the payment of Gratuity, please read the said Act.
Best Wishes,
Vasant Nair
From India, Mumbai
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As per the Payment of Gratuity Act, Gratuity is payable to employees who have put in continuous service of 5 years or more. This qualifying criteria does not apply in case of death. For a complete understanding of the payment of Gratuity, please read the said Act.
Best Wishes,
Vasant Nair
From India, Mumbai
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