Learned experts/members have given valuable advice. Kindly follow it.
The discussion as below is for the interest in the topic and is heartfelt opinion only.
{A} It is believed that company has stated in your appointment letter that your annual pay package (divided into monthly pay package) will be as explained in CTC sheet attached with appointment letter as annexure……. and has attached CTC sheet as annexure with appointment letter.
Thus all entries/amounts/payouts stated in CTC sheet are benefits stated in CTC sheet to attract the employee to the company. These benefits become contractual obligation on company.
The gratuity becomes eligibility of the employee after completion of 5 years of uninterrupted service so how and why can company make it part of CTC from day1 till 5 years?
Only those amounts which are actually payable to employee can be kept in CTC sheet/annual-monthly pay package of employee.
Gratuity is a terminal benefit payable on separation so how can it be kept in annual pay package of the employee by the company?
It is statutory obligation on employer and employee does not have to contribute a single penny even if it is treated as an expense by employer. Hence the employer can not shun his liability and transfer the onus on employee.
Simply said it is a cost to employer and employer can not transfer this cost to employee.
This amount is not received in the hands by employee so it can not have any bearing on annual/monthly pay package. The company has deducted this amount and has retained it too………..how can this be allowed????
Statutory Gratuity is not private Superannuation Scheme launched by employer for which as per provisions pursuant to standing orders of the company, employee also has to make a contribution, along with employer.
The Payment of Gratuity of Act also makes it mandatory ( Sec 4A)to obtain insurance from LIC or any other prescribed insurer with an aim to safeguard the statutory payment of Gratuity to employees. The amounts paid by employer for gratuity is not a premium and funds in the corpus fetch interest to employer.
The company is deducting the monthly payment of gratuity from annual/monthly pay package of employee and then adjusting the amount in its books too, implying double deduction………The practice of keeping Gratuity in CTC sheet may seem to be a fraud.
As per some of the views sensible companies may yield to persuasion by employee and may refund the amount as tax free Ex Garcia and thus avoid adverse implications. Some companies have been said to be doing it. Such companies who have been deducting it from employee then adjusting the amount in its books too, so double amount + interest should be paid to employee…….Isn’t it? While the companies disburse the amount deducted from employee only. Ideally the companies should apply the formulae of gratuity for such disbursement as amount has been deducted in the name of gratuity. Isn’t it? The whole practice may be termed a fraud ….minor or major.
The amounts permitted as deductible from pay package of the employee are statutory deductions, like PF, ESIC, and I. Tax and some amounts which are as per private agreement with employee. It is felt that the deduction in the name of contribution Gratuity can not deducted even by a private agreement.
CTC; Cost to Company:
Company would like to treat all expenses it has to incur due to employee being there in the company.
Does it mean that the fee paid by company for registration, license fee, pollution control board, shall be shared by employee??
Tomorrow companies may start asking to share the cost of detergent and sweeper as employee walks, moves in office, and dirty floor needs to be cleaned with some financial load on employee……
If the company wants to narrate all such expenses in some excel sheet it maintains in its computers/ledgers, in its HO it is OK.
The CTC sheet is usually prepared by HR personnel. They need to appraise the senior management, promoters that gratuity should not be computed in CTC sheet issued to employee and if it is added in CTC sheet then the amounts should be disbursed to employee even if employee separates before 5 years.
{B} ---------You have posted that:
“Please note that redundancy on account of closing of department, and not on account of mis conduct by employee (he is not terminated).”
You have highlighted that employee is not terminated but the dept is closed.
In other words you wish to define that:
“You are in a situation where your employer no longer requires you to carry out work of a particular kind or to carry out work of a particular kind at the same location, and your job is becoming redundant. Your position has been permanently eliminated.
You are not becoming redundant.”
Has your employer made you a reasonable offer of alternative work??
If yes and if you refuse it, you may lose your entitlement to a redundancy payment/ lay off / severance package if any.
What are the orders communicated to you? Kindly go thru the language verbatim and carefully. It won't be a “ da vinci code” and difficult to decipher.
Have you been asked to sit at home and wait for further instructions? Are you marking your attendance?
Or no order in writing has been communicated?
If the situation is lay off/redundancy…..then the employer has to inform the o/o Labor Commissioner/Controlling Authority of Gratuity/Govt……..
The purpose of closing down should be clearly understood.
Although employer would devise smart ways to cicumvent the process in order to suit his needs still a smart union, smart lawyer, well informed employee may suceed to poke holes in the contentions of the employer.
(The Reserve Bank of India commissioned a study into the causes of sickness in Indian industry and they reported cryptically, ‘Sickness in India is a profitable business).
For the purpose of Gratuity, kindly look into the following, and find out the loopholes which you can utilize in your favor:
THE PAYMENT OF GRATUITY (CENTRAL)
RULES, 19721
3. Notice of opening, change or closure of the establishment.- (1) Within thirty days of the rules becoming applicable to an establishment, a notice in Form A shall be submitted by the employer to the controlling authority of the area.
(3) Where an employer intends to close down the business he shall submit a notice in Form C to the controlling authority of the area at least sixty days before the intended closure.
Payment of Gratuity Act, 1972
Section: 2A
Continuous service.
For the purposes of this Act, -
(1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order [***] treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.
(2)
Explanation: For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which -
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicab1c to the establishment;
Section: 4
Payment of gratuity.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
Section: 7
Determination of the amount of gratuity.
(4)
(a) If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.
(b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute.]
You may find another thread as interesting:
https://www.lawyersclubindia.com/forum/Termination-from-private-service-by-giving-two-month-s-basic-75951.asp#.UTs2lErxHvo
Valuable advice of learned experts/members is sought.
