Gratuity
Sen
(Querist) 21 May 2013
This query is : Resolved
I've worked for a company for 3 years. My Cost to Company (CTC) break-up contains some amount as attributable to Gratuity. I'd resigned, served the notice period and moved on to another organization. I've received my full & final settlement along with reliving letter. However, in my full & final settlement, company has not paid me the gratuity due for three years maintaining that gratuity can be paid only after completing 5 years of service, as per Payment of Gratuity Act.
My query is that as Gratuity is part of my total Cost to Company (CTC), am I eligible to claim for the same?
Kumar Doab
(Expert) 21 May 2013
Gratuity is not and can not be on the basis of cost to employee. It is a statuary obligation on employer to pay Gratuity to employee without any cost to employee.
While preparing CTC sheet of the employee the HR personnel usually add gratuity component in annual remuneration negotiated with employee.
It is felt that it a wrong practice on the part of HR fraternity.
Employees in HR Division of the company are expected to, are duty bound to counsel the employer wisely, properly……………….and must advice and convince the Directors/promoters/proprietors that Gratuity should not be included in remuneration of the employee.
Payment of the Gratuity Act 1972, is one of the social security laws enacted to provide social security to employee and companies should take favorable stance.
The lawful authorities and courts of law have been taking a favorable stance whenever the matter has landed up before them.
There is provision for punishment and penalty both in the enactment ( Put proper emphasis on word WHOEVER IN THIS CLAUSE):
Payment of the Gratuity Act 1972: Section: 9: Penalties: (1) Whoever, for the purpose of avoiding any payment……… knowingly makes or causes to be made……… punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees or with both.
Payment of Gratuity is to be made by employer to employee after uninterrupted service of 5 years………so the employer can not levy any cost before 5 years.
Employer has to disburse gratuity @ 4.8% of Basic + DA, his resources without assigning any cost to employee.
If the employer starts deducting or attaching cost equivalent to this amount in remuneration of employee from 1st month of employment this amounts to collection from employee and can be termed minor fraud.
Isn’t it?
If the employer want to add Gratuity in his Excel sheet in his computers created for each employee ( not CTC sheet issued to employee) as it has to spare an amount @ 4.8% from 1st month it is perfectly alright.
If the HR personnel and/or employer get adventurous to add gratuity in CTC remuneration of employee, they may get adventurous to add cost of fan, AC and even detergent and wages paid to sweeper to CTC of employee as employee walks thus litters in office and soil the floor and floor get dirty and customers of employer get bad impression…………….!!!!!
Employer has to pay many amounts as fee for many licenses to be applied and availed by it from Government. Can the employer divide such costs and add in CTC remuneration of the employee and claim it has to spend these amounts for the reason that employee is there and it has incurred this cost due to employee????????
So isn’t it that these individuals who are adding Gratuity in CTC are littering nuisance!!!!!!
There are many threads which indicate that employees have succeeded in their claim on getting the payment of Gratuity if it is added in remuneration of employee and CTC sheet.
The question arise why these employers and their HR cell is adventurous. It could be as simple as that majority of the employee are ill informed, are fresher’s, are not member of trade unions, do not agitate and if time for punishment and penalty arrives employee is expected to behave like a thorough gentleman and enter into settlement and pardon the employer.
Hence only in rarest of the rare case employer has to pay and in rest of the cases employee succeeds in pocketing the amount.
So the job of HR cell is well cut out: help the employer to pocket the amounts.
CTC: Cost to Company: is term coined and given new dimensions and has become a fad to innovate how company can start paying less and less to employee.
CTC: Cost to Company: all cost born by company for employee being there.
The employer and its HR cell always scream that appointment letter is contract of service. Then appointment letter issued with remuneration based on Gratuity being part of CTC is also a contractual obligation on employer.
Payment of the Gratuity Act 1972: Section 4A; Section: 4A
Compulsory insurance: …………………… obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:
The amounts paid by employer for this purpose is not premium like premium for Group Insurance and it should not be at cost to employee. As per statutory provisions it can not be on the basis of cost to employee.
The government has made it mandatory to create fund for the payment of Gratuity so that employer does not have to look left, right and centre for a resource. LIC pays interest on this amount.
THE COMPNAY MAKES THIS PROVISION IN ITS BOOKS.
Thus is it not double adjustment????? One it is collected from /adjusted to employee, second it is adjusted in books…..!!!!!!!!!
Isn’t it Fraud????
Company collects the amounts/adjust it in books on monthly basis from employee and then pays after 5 years as per calculation of Gratuity Formula.
The question arises: as company gets more but pays less. Isn’t it?
Moreover company has adjusted the amounts twice but makes a single payment…………..again a fraud. Isn’t it?
If company has adjusted the gratuity component in monthly/annual remuneration then it has retained the amount for 5 years without actually paying it.
Even if we don’t look into legal intricacies common sense guides that the amount should be paid to employee if the employee leaves before 5 years.
It is felt hat companies which add gratuity in CTC agree to pay even if employee leaves before 5 years.
If you are finding it difficult to drill sense into the heads, entrust the matter to your lawyer.
Plea do go thru an interesting thread in which expert Mr. Raj Kumar Makkad has resolved similar query.
http://www.lawyersclubindia.com/experts/Payment-of-gratuity-392796.asp#.UZur8KKAqWM
Valuable advice of learned experts is sought.
Sen
(Querist) 22 May 2013
Thanks Mr. Kumar for your valuable insight.
I'd like to mention here that appointment letter has one clause which says that "Gratuity shall be paid as per Payment of Gratuity Act". Does this clause changes your opinion. Also, are there any case laws to quote.
Kumar Doab
(Expert) 22 May 2013
The opinion is heartfelt.
The stance is pro Employee.
It won’t change.
The Payment of Gratuity Act does not permit or advocate or guides that the payment of Gratuity be collected or adjusted from employee for 5 years and then be paid to employee after 5 years.
The Act is clear.
There is no confusion or ambiguity.
For your matter if it is likely to turn into a case obtain legal opinion from your lawyer at proceed under expert advice. Your lawyer would know how and when and what to quote.
The HR person/personnel or consultant who has crafted the appointment letter/CTC won’t give in easily until or unless the employee achieves a handle on employer.
It has been seen these personnel can not maintain their composure beyond a limit and surrender.
His own employment and employability might be at stake.
So the affected employee may expect a fight.
The employee should prepare well to win.
These HR personnel and consultants also access HR portals for opinion and at many of such portals the advice given by senior consultants, HR fraternity is “If Gratuity is mentioned in CTC sheet pay it to the employee…………..”
The employee should know how to build pressure up to that point.
This shall be the quickest and easiest solution.
Valuable advice of learned experts is sought.
Guest
(Expert) 22 May 2013
CTC has no connection with gratuity. Gratuity is a statutory liability of the establishment, as based on length of service of the employee, while CTC is a work and status based liability of the employer to be paid at monthly intervals. No contribution is required to be made by the employee towards gratuity. You may challenge the action of the company.
