Gratuity provision and payment process
CA K. R. Suthar
(Querist) 12 September 2014
This query is : Resolved
Dear Sir/ Madam!!!
I want to know that (a) what are the rules to make provision of gratuity for a director for a Pvt. Ltd. company. Is that compolsory for 5 years old pvt. ltd. company to make provision for gratuity.
Till now we have not make any provision for grauity, so what is the remedy?? (Our company is 5 years old registered)
(b) How to make entries for provision in current year for future payment of gratuity. (When should be started to make provision in accounts for what amount)
(c) Process of take policy or premium payment in practical view.
Sir/ Madam!!!
Please guide me as soooon as may be possible so i can file legal compliance thereafter.
Kumar Doab
(Expert) 12 September 2014
Yes.
It is @ 15 days{ (last drawn wages)………………..Basic+DA}/year.
While making provisions @4.83% of Basic+DA may be kept.
There is no wage ceiling for Gratuity.
There is no infancy period of Gratuity.
Check if your state govt. has issued notification for mandatory insurance of Gratuity.
LIC and FI’s provide Group Gratuity policy.
P&S section in nearest LIC branch shall be pleased to do business with willing establishments.
The o/o Controlling Authority of Gratuity and can guide you.
There are Labor Law consultants/Service lawyers/law firm that can handle the work for you with their expertise against a nominal fee. Choose an able counsel.
Even if mandatory insurance is not obtained and provisions of funds for Gratuity are not made employer shall have to pay Gratuity from its own resources to all eligible employees.
The Act and notifications issued by state govt. are also clear on it.
All personnel that are within employer-employee relationship are eligible for Gratuity.
Employer can provide for Gratuity to anyone by his sweet will even if employee is not eligible and at better rate. However employer can not deny Gratuity to an eligible employee.
There are provisions for penalty punishment with jail time for………………….. ‘Whoever’……………………. ( here word ‘Whoever’ literally applies to …………………………………..person himself that ……………………………under this Act or of enables any other person to avoid such payment,…………………………………implying be it HR personnel, admin, legal cell personnel etc……………….or employer personally/himself……………………..).
