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Saturday, 9 March 2013

13 facts one should know about Gratuity Act in India!!




Some Basics about Gratuity:

  • Gratuity Act is applicable to all establishments, where number of employees, are 10 or more in any day of the preceding 12 months.  Click here to download the Gratuity bare act.
  • Charitable institutes and hospital are also covered under the act.
  • It includes both commercial and non commercial establishment like educational institutes etc.
  • Only Basic and Dearness allowance should be considered as wages for the purpose of Gratuity.
  • Gratuity payment formula:

Example: If an employee leave company after 10 years and his last Basic + Dearness allowance is 10000 then his gratuity will be paid as per following formula.

(10000/26)*15* 10

Please note that above formula will remain same irrespective of employee working in 5 days a week establishment.


FAQ  1: Can an employee claim Gratuity even before completion of 5 years?

Yes, An employee can claim gratuity even before completion of 5 years in followings cases:
  • Death (to his nominees)
  • Disablement

But the quantum of gratuity will be as per act.

FAQ  2: Can employer forfeit Gratuity, even if employee has completed 5 years?

Yes, employer can forfeit gratuity even if employee has completed 5 years in following cases:

  • If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
  • If the service of such employee have been terminated for any act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment.


Please note that above act should have been committed by employee during his employment. There should be a proper enquiry held after which employee was found guilty for aforesaid act or misconduct. Once proved guilty, employer should issue termination note to employee describing about his misconduct.

FAQ  3: Gratuity Payment when employee has completed 4 year and 240 days in 5th year?

This is one the most frequently asked question and there are various views available on it.

As per Section 2A of Gratuity Act (Continuous Service), an employee is eligible for gratuity if he has completed:

(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and


(ii) two hundred and forty days, in any other case;

Earlier, I was also of opinion that gratuity can only be paid once an employee completes 5 years of continuous service which is not the case now as state above.


Following is the complete draft of the Section 2A of Gratuity Act for better understanding:

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) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer -
(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than -
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than -
(i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case;
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;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment and
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.
(3) where an employee employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during such period.

FAQ  4: Gratuity payment in case employee has worked for more than 5 years with same employer but in different establishment?

Let’s take an example, that if an employee has worked in a company ABC for 3 years and due to some reason, he has been moved to company XYZ under same management. Employee got his Full and Final from ABC Company but not the gratuity amount as he has not completed 5 years there. He has spend another 2.5 years in company XYZ and resigned. At the time of his Full and final, will he be eligible for gratuity?

Answer is yes as both the companies are under same management and employee has completed 5.5 years to gather in both companies.

FAQ  5: Do company need to take insurance policy against LIC? Is it mandatory?

Gratuity payment is responsibility of employer. Nowhere in act, it is mentioned that employer need to take any sort of insurance policy for gratuity payment. Hence it is up to employer whether they want to take insurance policy to cover its gratuity liability.

There are various benefits of taking insurance policy for insurance company to cover gratuity liability, let’s say LIC:
  • Employer ensure that its liability is taken care by giving regular premium to LIC
  • Employer get tax rebate against that payment.
  • LIC also do life insurance for each employee hence in case of employee’s death, employee family get sum insured amount apart from gratuity.


FAQ  6: How much gratuity amount is exempted from income tax?

FAQ  7: Can a company refuse to pay gratuity due to financial Loss to employees?

No, even if company is not doing financial well, company is bound to pay gratuity amount.

Company should ensure that it pays gratuity within 30 days from the date when gratuity become payable to an employee. Also it is responsibility of employer to notify employee about his gratuity payment even if employee do not apply for same. It is employer duty to pay the gratuity.

FAQ  8: Will an employee resigning from service or retrenched by employer will be eligible for Gratuity?

Yes, if they are satisfying the criteria of completion of 5 years. In case of employee who has been retrenched after 5 years of continuous service will get both gratuity and retrenchment benefits.

FAQ  9: Gratuity in case of contractual employee. Who will be responsible to pay gratuity?

In case of contractual employee, contractor is liable to pay gratuity but if contractor do not pay gratuity to employee then principal employer can be directed to pay the gratuity amount.

FAQ  10: Will trainee be entitled for Gratuity after completion of 5 years?

Yes. But employees who are hired for some temporary work should not be considered under gratuity act. Please download some important judgement in support of this.

FAQ  11: Company making gratuity as part of CTC is correct?

This is another most debatable topic. Basically CTC stands for, cost to company and every company takes it different way. Hence, it is up to company whether they want to make it part of employee CTC or not.

There are two views:

One, employee become eligible for gratuity only after completion of 5 years so how come company can make it part of employee CTC and what if employee do not complete 5 years and leave the company before.

Second, as it is liability of employer to pay gratuity to employee in two cases: 1) when employee competes 5 years and 2) in case of death and disablement irrespective of completion of 5 years hence employee should make it part of CTC especially when employer has taken insurance policy to cover gratuity liability.


FAQ  12: What is the ceiling of gratuity amount payment?

It is Rs 10 L. In case an employee gratuity amount is more than 10 L then company is bound to pay max 10 L. In case company want to pay more than 10 L then company can pay it as performance bonus or ex gratia. Click here to download the notification for same.

FAQ  13: How to treat number of months for the purpose of gratuity calculation after completion of 5 years?

For example, if an employee has worked for 5 years and 7 months then for the purpose of gratuity payment, 7 months will be rounded off to an year and he will get gratuity for 6 years but in case employee has worked for 5 years and 5 months then he will be eligible for 5 years gratuity payment only.

Have a look at next version of this post : Another 10 FAQ on Gratuity Act in India.

If you are really serious about learning HR and want to grow then visit our web page LEARN HR THROUGH PRACTICAL IMPLEMENTATION

Important Note:

Dear Friends, Due to so many comments on this blog post, I believe further comments are not visible and my replies to those comments in not getting registered. Hence request to all of you to ask your questions on our HR Forum. 

Link of the forum is as below:

http://hrsuccesstalk.com/forum/

606 comments:

1 – 200 of 606   Newer›   Newest»
Jyoti Arora said...

Very informative. Can you let me know if an employee has worked for 5 yrs 6 mths then he is entitled for 5 yrs or 6 yrs Gratuity.

Govind Negi said...

Dear Jyoti,

It will be rounded off to 6 years.

PRABHAT RANJAN said...

Informative and useful.Now Companies either pressurize the employee to resign few months before completion of 5 years of deliberately terminate or retrench in 5th year.

Pls let me know the remedies available to the employee if company terminate the employee in order to save the Gratuity amount.

munna love u said...

We can consider as 6yrs.

Rajshekhar said...

Dear Sir,

Its very informative, you covered it every important points in simple way.

I request if you do such points for other important acts also will be helpful for every one.

regards,
Rajshekhar

Govind Negi said...

Dear Rajshekhar,

Thanks for appreciation. I will surely work on other Acts in same way and will publish in my future posts.

Govind Negi said...

Dear Prabhat,

Every termination should have valid reason of termination. An employee can surely challenge termination of his employment in case it is done to save gratuity amount.

Also especially in case of employees who fall under workmen definition, i dont understand why employer will do it because employer need to pay retrenchment amount which is equal to gratuity amount.

Deepa said...

Hi Rajshekhar,

Thanks for sharing these details...its very informative. concise & clears some basic information for Gratuity..

Regards
Deepa Shah

Govind Negi said...

Dear Deepa,

Thanks for appreciation.

raja prasad said...

hi Govind
It is very useful ,could yo please give me more info about ESi,PF,challans,as i want to move into HR Admin profession.Thanks for the article

Govind Negi said...

Dear Raja,

Sure. Mean while you can send your queries on govindsinghnegi@gmail.com

Charles said...

Hi Govind,

Killer Points & Informative

Help me in getting some insight of Income Tax


Regards
Charles

Govind Negi said...

Dear Charles,

Thanks for your appreciation.

Abhaya Venugopal said...

Hi Govind,

Very informative. Thanks for putting this up.

I have one question. If a company puts the Gratuity amount as part of CTC and also deducts that amount every month from a person's salary, then if the employee resigns before completion of 5 years, can he claim that Gratuity amount in final settlement?

As such Gratuity is like a thanks giving from Company's side for a person who has dedicated minimum 5 years of service for the betterment of the company and so should not be considered as part of CTC.

But nowadays, the accounts people fool the management and make them believe that this should be part of CTC since it is a cost to the company.

If company refuses to give the deducted gratuity, at final settlement, can the employee go to court for this?

Look forward to your reply.

Thanks
Regards
Abhaya

Govind Negi said...

Dear Abhaya,

Employee can not claim gratuity before completion of 5 years even if it is made part of his CTC.

Umesh Shukla said...

Dear Sir,
As you mentioned in earlier posts and law itself says it, that in case of completed years of service months shall be rounded of to the integral value ,then why cant we take this as reference to claim gratuity on completion of 4.6 years of services.


Regards
Umesh

Govind Negi said...

Dear Umesh,

As per act, an employee is eligible for gratuity only after completion of continuous five years and not before hence there is no question of rounding off. Hope this will clear your doubt.

Anonymous said...

Hi,
Can you inform me if the employer is bound to pay gratuity if the number of employees fall below 10. For e.g. in the FY 10-11, if there were 15 employees, and in the FY 11-12, there are only 9 employees, is the employer still bound to pay gratuity to any of the one employee out of 9 employees resigning in the year 11-12 who has completed 5 years of service?

Govind Negi said...

Yes, Employer is bound to pay gratuity as per your case. Act which become applicable once remain applicable in future.

Raj said...

Thanks Mr.Govind,
For such nice posting on Gratuity. You could able to cover almost all area of query.I could able to have a nice clarity on the same. Once more thanks a lot.I would like to have a small query on the same.One of my friend was on management cadre and left the company on allegation on integrity but neither any proof along nor any inquiry was conducted.In this regard even no letter was also issued to him. Based on verbal communication he discontinued attending the job.Please be informed that no resignation/relief or termination was given from either side.He has completed 7 yrs of his duty with the Organisation.As per law he should get the salary for the working month ,Gratuity for 7 yrs,one month notice period at least.When he approached to factory management where he was working for this they are saying we will take approval from H.O and will settle the same.By this way they had taken almost 2 years.Can the claimant take help of court or where he should take help for his claim.Kindly be informed that there is no written or any inquiry was conducted and this was result of zealousy with one of senior peer working with him.Please guide how to resolve this.

regards
Rajesh kumar singh

Govind Negi said...

He can surely approach court. He is eligible for gratuity and other benefits. Simple steps to follow:

He should send letter to company asking for his rights and in case of no action possibility of approaching court.

If no result, then take help of any advocate and approach court. He will surely get his rights.

Aparna Gupta said...

Hi,this blog provides complete information about gratuity and it clears all the doubts.
I woul like to thank to you to share such a valuable information.i would request to you share also some more topics of hr..

Govind Negi said...

Thanks Aparna. You can visit my other post by surfing through topic wise labels on top right side. I will surely come up with few more posts.

PRENEESH D said...

Hi Govind,

Thanks for making a part of reading this , so informative please do more in future . congratulations and all the very best.

Govind Negi said...

Thanks Preneesh,

Thanks for appreciation

pourna tadaka said...

Dear Govind,

I am Pourna Singirikonda working as HR Executive , our employees want to voluntary contribution towards PF , in our company we take 12% on 6500/- as basic limit.

as per Statutory rules employee can contribute 88% on actual basic towards voluntary contribution.

My query is voluntary contribution 88% on actual basic so if employee wants to contribute less than 88% can he contribute. and how other administration charges to be calculated.

Please clarify .

Thanks in advance and send to t.pourna@gmail.com

Thanks & Regards,
Pourna.

Sandesh Sarode said...

Dear Sir,
Thanks for sharing such valuable & essential information in r/o Gratuity. This 13 FAQ may genuinely clear everyone's doubts pertaining to Gratuity especially who are engaged in Labour Law & HR profile. Thanks Once Again!!!!

However, I would like to know about my query posted below:

One of my friend was working with XYZ company on probation period for 1 year and after completion of probation period he got confirmation letter from Management. His total tenure of service was 5 years 3 months. (Including Probation Tenure)

In view of above scenario I would like to know about whether he is eligible for Gratuity? Should we consider Probation period/ training period etc. for completion of 5 years of service while computing Gratuity Payment to the concerned employee?

Kindly apprise with your valuable suggestions.

Thanks in anticipation.

Best Regards,
Sandesh

Govind Negi said...

Request you to post your query on http://hrsuccesstalk.com/forum/. You will surely get an immediate response.

Govind Negi said...

Dear Pourna,

Request you to post your query on http://hrsuccesstalk.com/forum/. You will surely get an immediate response.

miaz said...

Hi Govind,
Thank you for sharing your knowledge and learnings in the above which has also brought out queries from others who have read the same. This gratuity being a part of CTC has boggled me for far to long, later realised it being the CTC and is not Salary structure.
Why do we keep mixing up these two?
Thank you once again and look forward to such informative post

Govind Negi said...

Dear Miaz,

Rightly said, we should not mix salary and CTC. Every employee should see what is the in hand salary and other benefits which are either reimbursable in future like LTA, medical reimbursement or reducing his other liability by any way like medical and accident insurance etc.

Rest other components are for employer to ascertain his cost

Kumar said...

Hi Govind, The post is very informative and I am sure that this will be resourceful to solve the mystery behind the "Gratuity Payout". I will definitely forward this link to many of my colleagues as they are still not sure about the concept and how it works, calculation etc.,

I do, however, have one question though.

Suppose if an employee has worked in a company for 6 complete years, still continuing in the same company. Can he claim the Gratuity while he continues to work in the same organization?

Also, can he again claim his Gratuity after working for another 5-6 more years in the same company?

In short, in a 11-12 years of continued work experience in a same company, can an employee claim his Gratuity twice?

Just curious

Thanks a ton
Kumar

Govind Negi said...

Dear Kumar,

this is not possible. Gratuity is payable only when employee leaves the company or in case of death and disablement hence there is no way to get gratuity during continuation of employment.

Good thought but not possible as on date.

you can post further queries on Forum to get better answers

http://hrsuccesstalk.com/forum/

Anonymous said...

Dear Negi,
I want your opinion in this case. A company has multiple offices in multiple locations and wants to close specific locations offices, citing that ROI is nil, and asking its employees to move out , search for jobs, etc.. In this case, what are the benefits the employee can claim from the company..? Some employees are lucky to get a job, and others are not... What is the legal solution in their case.. Pls clarify. Thanks..

Govind Negi said...

Dear Friend,

they can claim whatever is applicable as per law like retrenchment compensation if employee fall under definition of retrenchment compensation, gratuity if applicable, notice period as per appointment.

For more answers on this subject please post your query on HR SUCCESS Forum. Link is http://hrsuccesstalk.com/forum/

Anonymous said...

Dear Mr.Govind,

My previous employer had paid gratuity to me even though I had not completed 5 years since he had shown it in the CTC. My current employer does not do this. However, during negotiations they had conveniently shown this as part of the CTC. If an employee is only eligible to claim/receive gratuity after 5 years of uniterrupted service, how can they show it in the CTC in the 1st year till the 5th year? If they show it in the CTC, are the employers not lying to the employee? An amount promised to an employee every year cannot be denied to him. I would like to know your opinion on this.

Soham Majumdar said...

Dear Mr Negi,

Thank you so much for the informative post. Shall go through your other posts to gain valuable information.I am currently working as aa site HR & Legal officer at a factory. Would be glad if you add me to your mailing list so that all recent updates can be shared.
My e mail id is - soham.majumdar8@gmail.com . Looking forward to hearing from your end.

Warm Regards,
Soham Majumdar

Govind Negi said...

Dear Friend,

I have already shared my views on this in FAQ 11. Nice to hear that your previous employer has paid you gratuity amount even if you have not completed 5 years. Very rare example. Majority of company do consider gratuity as part of CTC due to their liability.

Govind Negi said...

Dear Sohan,

First of all thanks for appreciation and good to know that this blog is helping you to grow in your career and get more and more information about various aspects of HR. You can register yourself to mailing list to get updates on regular basis.

There is a text box on the right side of this page (Just below my profile details) where you can mention your email id and then click SUBMIT. Simple

Govind Negi said...

I would strongly suggest that if you want to get more such information then you should visit HR SUCCESS FORUM and post your queries out there to get answer from many other HR Professionals.

Link as below:

http://hrsuccesstalk.com/forum/

ARVIND said...

Sir,

Is it compulsory to take Professional Tax Registration for all those location where PT is applicable since the registered office of the company is in Non PT location?
The registered office of my company is in New Delhi but there are some employees who is working at three of those location where PT is applicable.Should we deduct Professional Tax for the same?

Regards,
Arvind Tiwari

Govind Negi said...

Please post your query on forum. Also mention states where your employees are deputed and whether you have offices there?

Govind Negi said...

Link of Forum as below:

http://hrsuccesstalk.com/forum/

Anonymous said...


a

Anonymous said...

Dear Mr Negi,
Thank you so much for the informative post.
I have completed 5 year in my current organization and I am not sure how much I will be getting the gratuity amount after my last date with the organasation.
Please let me know how our gratuity amount should be calculated.
As per gratuity act, it should be = Last drawn salary(basic+DA)*15/26* number of years.
We have the salary structure like this in our organization:
Basic
HRA
Conveyance Allowance
Special Allowance
So my question is that how my gratuity amount should be calculated , It should be
Basic pay*15/26*5

OR

(Basic+HRA+CA+Special allowance)*15/26*5

Govind Negi said...

More simpler way is to do like this Basic*4.81%*number of months you have completed.

Eg. if your current basic salary is 10000 and you have complete 5.5 years i.e 66 months then 10000*4.81%*66= 31746

You can post your further queries on HR SUCCESS Forum i.e. www.hrscuccesstalk.com/forum or www.hrscuccesstalk.com

Anonymous said...

Mr Negi,

You last post or method to calculate Gratuity is the most simplest and Best way to do it.

However, The reason I'm on this Blog is a doubt which I had in my mind, I had recently resigned from my current organization and I'm about to complete my 5 Years during my notice period. Will I be eligible for my Gratuity or not and could an organization deduct LWP(Leave without pay) from total 5 years of working days and deny me gratuity as I had gone on a leave for a month during my 2nd year in service.

Anonymous said...

Excellent informative post. Thanks a lot for this. was wondering why the act has decided 5 years as the eligibility for getting gratuity. I srongly feel the act should be amended or some change should be made and this should be 2/3 years max. 5 years is way too long these days.and since gratuity is part of CTC in most companies all the more it shuould be paid even after 2-3 years of completed service in the company.

Regards
Rekha

Bhaskar said...

Dear Sir,
In a span of 16 years 11 months of service(as calculated by company), I have 2 years with LWP of in two consecutive years 141 and 181(approved LWP, no break in service). I was paid gratuity reducing these 2 years from total service. Apart from that they ignored 11 months also.

So they paid me for 14 years. Shouldn't I get gratuity for 17 years?(after considering 180 days in a year minimum attendance)

Please clarify me.

Regards,
Basu

Govind Negi said...

Dear Friend

You should complete your 5 years to be eligible for gratuity. And it will be calculated considering your Date of joining and date of leaving. Notice period is considered.

Request you to post your further queries on HR SUCCESS TALK Forum which is www.hrsuccesstalk.com

Govind Negi said...

Dear Basu,

Request you to post your further queries on HR SUCCESS TALK Forum which is www.hrsuccesstalk.com

Do you know why they have further deducted 11 months? If yes, then mention that also during posting your query in above forum.

Thanks

Govind Negi said...

Dear Rekha,

It would be great for employees. Also i would like to add that 2/3 years still common if you see manufacturing units and especially below manager profiles.

Its up to govt to decide.

Anonymous said...

Dear Sir,

Thanks for this article. I would like to ask you, in casee the company closed down business activities & employee have worked for 3 to 4 years. can he claim the gratuity for that period. the employer is terminationating employee do to close the business.

Please reply soon.

Thanking you

Govind Negi said...

Dear Friend,

As per my understanding employer is not bound to pay gratuity in this case as employees have not completed 5 years of services.

Anonymous said...

I have been working more than 5 years with a company. Can i withdraw my gratuity before i put papers ( during my course of employment), or is it payable only after me leaves( during final settlement)

Govind Negi said...

It is payable only once you leave the company and completed 5 years. You can claim gratuity before leaving.

chand said...

Hi Negi,
I was working with a software industry for more than 5 years. After resignation, company didnt pay gratuaity saying company is not doing well. Then i submitted form "I" and after one month i submitted form N with all other documents. After 5 hearing the controlling authority has awarded the money. But still the company is paying the money. What is the next step?

chand said...

sorry negi, Company is not paying the gratuity amount..

Yuvraj Singh said...
This comment has been removed by the author.
Anonymous said...

What is the minimum Gratuity is payable. Maximum is 10L. For a person drawing Basic salary 5000/- with 30 yrs of service, how much amount he will get?

Govind Negi said...

Yes 10L is the maximum limit. You will get 5000*4.81%*30*12. Do the calculation please.

Govind Negi said...

Dear Yuvraj,

I would suggest to post your query on HR SUCCESS TALK Forum. www.hrsuccesstalk.com

Govind Negi said...

Company cant refuse gratuity on the basis of its financial health problem. Please re complaint to the authority mentioning no action is being taken by company yet.

Judeesh jacob said...

HI,

I have small question

Leave balance will be calculated in gratuity eligibility period?

-THanks
Raju

Govind Negi said...

Dear Raju,

If you mean that balance leave should also be calculated in 5 years then the answer is no.

Prachi Kaul said...

As a compnay, in how much time should the Gratuity amount be paid to an employee after his releaving date? Immediately with Full and Final, or it can be paid with a delay of month or two?

Govind Negi said...

Max within 30 days.

Anonymous said...

Hi Sir,
First of all Thank you much for sharing such true knowledge with us, which is a rare incident in online world now days. I appreciate all your efforts and time you've invested in this article. Sir I am student from Delhi 25 years old doing my masters from delhi university. I've had major concerns regarding this gratuity act, My father passed away last year aug 2012 and my mother passed away in 2008. My father was Oriental bank of commerce employee , he was promoted on officer grade when he passed away. Sir the concerned is in his PF he did mention the nomination of my mother and myself however in his gratuity the bank authorities are saying there isn't any nomination mentioned in the gratuity records. hence in this case bank people are saying that myself and my grandmother would be equivalent nominee and the amount would be shared between the two, however i do not know anything about the whereabouts of grandparents I've not seen them till date and my parents mentioned that they've seperated from my grandparents soon after their marriage. So i don't know anything about them however they are still alive. now on this whole situation bank people are saying that it's your personal family issues bank has nothing to do with it, either you bring your grandmother and we would need her authorization and then sum would be divided between the two of you on which i have no issues , or else wait for period of 7 years if you are unable to get hold of her. Sir I request you kindly shed some light on this matter I'll be highly obliged.
Thanks

Govind Negi said...

Dear Friend,

It will be great if you post your query on HR SUCCESS TALK form so that other HR professional can help you in this case. I think somewhere bank officers are correct.

Anonymous said...

Dear Sir,

I have worked in a construction company having employees more than 200 members. I have worked for 13 years. Now the management is forcing us to resign and rejoin in the same company. But they are not willing to give gratuity. Now if I go to court for gratuity they will not rejoin me in the company. Please help me.
Ramesh K.

Govind Negi said...

Dear Ramesh,

You can approach court. Court has right to direct company not to force you to resign. If they do so then action can be taken against you. but it require your will power.

Madhura Shidore said...

Dear Mr Govind,

Thank you for informative post on gratuity.

My query is, if the employer is including gratuity contribution in CTC and also deducting gratuity from employee's salary, then while calculating taxable salary, the Employer's contribution will be taxable? Same question will be for PF contribution. Thanks in advance.
Madhura.

Anonymous said...

Dear Sir,

My company has reduced the basic salary in the latest revision, with a view to save the gratuity payable to employees. Most employees in my company have spent more than 5 years, and the company seems to have taken this step to save on the gratuity amount which would amount to crores of rupees.

Almost everyone of the hundred odd employees, from a total of 600 employees who are eligible for gratuity when they leave would lose more than one lakh rupees even at the lost levels.

This company was taken over by a PE firm in the recent past, and this has been done by the firm which toom over the company.

Employees who have complained about this have been threatened with termination of service.

Please suggest what are the options that we have? Can a company reduce the basic salary, like this.

Regards,

Anonymous said...

Hello Govind,

Thanks for such a nice post. I am working with an It company for almost 4 years now. Currently the company says that you put your papers and join another company who is under same management for next 5 months. And again after 5 months you can join back the original company. After I join the original company again they will deduct amount of my gratuity from salary. My concern is where is the employee getting benefited for their 4 years of service, though company claims that they cannot pay gratuity for these 4 years as they have not deducted any gratuity from my salary.

Below are my questions
1. Is this move by company right or wrong according to law?
2. What further steps i should take so that my interest is not harmed?
3. Can I completely reject the offer that company is putting in front of me as this is no where beneficial for me?

Looking forward for your precious comments.

Regards,
Nisha Thakur

Govind Negi said...

Dear Madhura,

There is no question of gratuity being taxable or not if employer has not paid it. Assuming that gratuity is only part of your CTC and you have not been paid by employer, gratuity is not earned yet hence it is not taxable. When employer will pay you gratuity after 5 years and you leave, it is non taxable till 10 L. Request you to post your further queries on www.hrsuccesstalk.com

Govind Negi said...

Dear Friend,

Basic salary can not be reduced for any purpose in normal circumstances. Can i know what is the current Basic and what is the new one.

All employees need to register collective grievance to any agency like PF or labour and take this ahead.

Request you to post your further queries on www.hrsuccesstalk.com along with data asked by me

Govind Negi said...

Dear nisha

1. This move is absolutely wrong.
2. Well, you need to write an application your employer about the same and ask about your gratuity if you change your company and then come back after 5 months. You should primarily ask what is the reason for doing so?
3. Yes, Not only gratuity but what about your PF fund.

Also note that if an employee move from one company to another which is under influence of same management and employee has completed more than 5 years of continuous service in both companies then at the time of leaving the company employee can claim its gratuity and employer need to pay that else court is the next option.

Request you to post your further queries on www.hrsuccesstalk.com

Anonymous said...

Hello Govind,

Also I assume that company is at fault that they didn't deduct gratuity in past year of my employment and now to hide this mistake they want me to shift to another company so when they say that they cannot pay gratuity because they didn't deduct it from my past salary so are they correct at their part?

Nisha Thakur

Regards,
Nisha

Govind Negi said...

Company can not deduct any amount from employee salary as gratuity. It is employer obligation and liability and employer need to ensure to pay it to employee. You must be saying that they have not included it as part of your CTC. In that case also it doesnt matter. They have to pay gratuity in any case if you complete 5 years of continuous service.

Anonymous said...

Hello Govind,

Thanks for your reply this was really helpful.

Regards

Anonymous said...

Earlier the structure was :
Basic + HRA=40% of Basic + Transportation Allowance.

Now, they are changing the structure,
Basic=30% of CTC
HRA= 40% of Basic
Special Allowance
Transportation Alowance
Food coupons

Basically, they have changed the basic which we were getting earlier and putting it into Special Allowance.

Though this affects around 100 people, my basic would go down from 18000 to 12500 in the new structure, if that is useful to give an answer.

Around 100 employees are affected. I have spent more than 9 years in the company and I stand to lose a large amount in gratuity. Some of these employees have spent 20 years in this company.

The company was taken over by a PE fund, earlier it was a privately owned company.



Govind Negi said...

It is possible if PF deduction is capped on 6500

Phani said...

Hi
I have worked in a software company for 7 years and then I'm moving to US (Same company - intra company transfer on L1 Visa). Am I eligible for the gratuity now?

Govind Negi said...

If you have not left the company then you can not claim gratuity.

Anonymous said...

Dear Mr Negi,
This is indeed the most comprehensive Q&A on Gratuity and clears a lot of doubts on the same.
I also have a question regarding the same:
Our company has kept basic limited and introduced various allowances, although some allowances like conveyance, books etc are helpful in tax saving, allowances like Special allowance which is taxable are purely to keep the basic low
for Gratuity calculations, shouldn't these allowances also be taken into consideration.
By keeping these heads under the salary structure, isnt the company cheating on the actual basic. eg my salary is 2Lakh pm, but my basic is only 30k pm.
Also as per IT rules, all these various heads except the reimbursable come under the heading of salary.

brijesh said...

Hi!
I had worked with a company where I complete almost 06 years.
And I get clearance on 22nd april 2013 but till date I had not received my gratuity amount.So, can you please tell me is there any specific time frame to get that gratuity amount.

My Employement duration:
01st june 2007 to 22nd april 2013.

please help!!

Govind Negi said...

Dear Brijesh,

Gratuity should be paid within one month from date of leaving of employee by employer

S Jayaraman said...

hi
i hv worked from 26.02.1976 to 31.05.2013 and got retired. my last drawn consolidated (basic+da) was 27405. what is the gratuity calculation? and is there any rule [15/26 for <30 years and 30/26>30 years]?

thanks
jai

Govind Negi said...

Dear Mr Jayaraman,

There is no separate rule for gratuity amount calculation in case of employment being more than 30 years.

In your case, gratuity amount can be 27405 x 4.81% x 12 x no. of years of employment

Phani said...

Hi Govind
Thanks for your response. I was working with a company X registered in India and now I'm moving to company X registered in USA. I'll be a permanent employee in US from now => I'm no longer an employee of company X registered in India. Am I still not eligible for gratuity. Appreciate your response.

Thanks.

prabir shaw said...

I was an employee of DPS,Jamshedpur for more than 10 years.Last March I was resigned from the job.Although I was a permanent employee & in my contract it's clearly written in the case of resignation / termination there will be three months notice from either side but the management breached the contract & condone / relaxed us from the three months notice & said you will have to leave & given us the release letter.
1.My question is that shall we claim for the three months notice period salary along with earned leave encasement.
2.How we'll get our Gratuity.Because the management is saying they will not pay us the Gratuity in any condition.

Please give us guideline how we can proceed to apply for our gratuity.

Regards,
Prabir

Govind Negi said...

Dear Prabir,

Please post your query on HR SUCCESS TALK Forum for detailed answer.

Quick response, 3 months notice pay depends upon few inputs from your side
Employer has to pay gratuity in your case.

Govind Negi said...

Dear Phani,

Please post your query on HR SUCCESS TALK Forum i.e www.hrsuccesstalk.com for detailed answer.

Govind Negi said...

web link of forum www.hrsuccesstalk.com

Phani said...

Hi Govind
I have posted there. Thanks.

-Phani

Govind Negi said...

Dear Phani,

thanks. I have replied to your query.

Following is the link:

http://hrsuccesstalk.com/forum/Thread-Gratuity-and-Intracompany-transfer

lovely dheer said...

but in other case the act of esi and pf is applicable on company, then not unapplicable on company in the future so that i can say that how gratuity act unapplicable once it is mentioned on company..

Rohit Deshpande said...

Hi,

I resigned from an organisation whilst onsite after serving 8 years, and basic that I was getting in India was the least so that I don't fall under tax bracket, whereas I was paid full salary onsite in local currency.. Now when I got my gratuity it was the least basic that I was getting in India that was considered for calculation ! .. Is this correct ?

Regards,
Rohit

Govind Negi said...

Dear Lovely,

You are correct. If gratuity act is applicable once then it remains application till company stays. Same case with PF and esi

Govind Negi said...

Dear Rohit,

You need to share some more information like does your salary break onsite contains basic as component? Also when did you joined and is there any transfer in between, if yes where etc

Please post your query again on www.hrsuccesstalk.com along with this information so other forum member can answer your query in better way.

Anonymous said...

Dear Sir,

I have resigned from my organization after completing 4 years and 10 months.
although i will serve 3 montsh of notice period . so my total experice would be 5 years and 1 month.
Can I claim my Gratuity?

Anonymous said...

Thanks for the very informative piece on gratuity. I completed more than 5 years of service and resigned. I have not received gratuity from my company even after one month. No reply is given to my application for gratuity. Can you pl. inform where to lodge complaint for non-payment of gratuity? My location is Gurgaon.

Anonymous said...

I wanted inquire if I have worked in a company, ABC for two years from 2006 -2008, and then rejoined the company with a different team in 2009 till present, which amounts to 4.5 years , am I eligible for a gratuity?

Govind Negi said...

Dear Friend,

If there is a gap in your rejoining then you are not entitled for gratuity.

Govind Negi said...

Dear Friend,

You will be entitled for gratuity. employment tenure for gratuity eligibility is calculated from DOJ and DOL and not from Date of resignation.

Govind Negi said...

You can approach to local labour office and file your complaint. Also ensure that communication with employer should be done through registered post with AD.

Send them a letter again stating that you have not received any revert and now you are left with only option of approaching labour office

Anonymous said...

Hi,
I have joined in a government firm in the year 2007 as contract staff on consolidated pay. In 2008 I have got promotion and joined in the higher post without resigning or relieving from the previous post.In 2011,on completion of my 3 year contract, they relieved me and gave me the relieving letter.After 3 days break,they issued a fresh appointment without conducting any test or interview and the salary offered was same as my last month salary.I am still in the same company.My doubt is that whether I am eligible for gratuity as I have completed 6 years of service in the same company?

Anonymous said...

Hi! Sir
I want to know whether 4 years 8 months service is entitled for gratuity?

Govind Negi said...

Dear Friend,

No, you are not eligible.

Govind Negi said...

Dear Friend,

You are not eligible for gratuity as there was break of 3 years in your rejoining.

Anonymous said...

I joined company X in India, and after a few years they transferred me to their USA branch. After 5+ yrs I resigned from company X directly from USA (without returning to India).
My salary in USA had just one component called "base salary".
I also have a Indian compensation package, which is just on paper. It would be used if I had return to India to continue my job. While in US I dont get that Indian salary.
Will I be paid gratuity based on the US "base salary" or the basic pay in Indian package? The gratuity act 2010 says "last drawn" salary. My "last drawn" salary from company X in the US salary.


Anonymous said...

Dear Govind,
I have only 3 days break in my rejoining and it was intentionally created by my company.There was no interview or selection process conducted for this. My question is whether I can move to labor commissioner for Justice, because again after 4 years or 3 years, they will repeat the same and create break in our service.

Anonymous said...

Hello Mr. Negi,

Thanks for the article and more importantly for the answers to all the posts. Extremely helpful and informative.

I too would like to bother you with a question. I have recently moved to the UK offices of a company after being with this company for 10 years in India. Effectively I understand that I am not entitled to a gratuity payment at the moment as I have not resigned from the Company. However if I do choose to resign from the UK offices and move to a different company in France, will I still be entitled to the Gratuity amount that was accumulated while I worked for the 10 years in India?

I will be highly obliged if you could kindly answer.

Govind Negi said...

Dear Friends,

You are entitled for gratuity for your 10 years services in India.

Govind Negi said...

Dear Friend,

Not very sure on it. May be on Indian pay package or may be not. REquest you to approach your HR and let them answer it and provide you suitable proof in support their action. Do share back with us.

Anonymous said...

Hi Negi

If any work 4 year 7 month then will he be entitle for gratuity .

Anonymous said...

Read all the questions and answers before you post the same question again and again.

Anonymous said...

Thank you Negiji.

Govind Negi said...

Not eligible for gratuity.

Ankit Khemka said...

Dear Mr.Negi
Your post is really valuable considering little awareness that people have about gratuity. There is one point on which I am little concerned and that is Insurance for gratuity. While going through the Act I found that Insurance is compulsory (for entities not having their own separate gratuity fund). Pl. advise if it is compulsory in your opinion. Also It would be great if you could tell if any registration with any government department is required.

Thanking a lot!!

CA Ankit Khemka

Govind Negi said...

Dear Ankit,

Registration with insurance company is not compulsory. Company should simply book liability of gratuity in accounts book. There is no requirement of registration of company with any govt organization for gratuity.

Anonymous said...

Hi
I joined a IT company on 15-Mar-2004 and left the company on 10-Nov-2008. If i calculate the total time it will be 4 yrs 241 days. I read if you have worked for 240 days in the 5th yr one is eligible for gratuity(or 240 each year)? Am I eligible for gratuity? Can I claim it now though its almost 5 yrs back? I am sorry this might be similar query but i have read so many articles that I am confused. Some article say 190 actual working days(not including week ends) for people working 5 days a week.

Regards
Chirag

Ankit Khemka said...

Thanks for your valuable time.

Neeru Sharma said...

Hi, Mr. Negi
I joined an IT company on jan-2008 as an intern with bond period of 2 years with company. though it was contractual job since 2008 serving on actual payroll of company. As am serving continuously in same organization with regular increments from jan 2008 till date. I joined as an intern initially for 2 years after that got promoted to Contract Engineer level I,II,III and so on.. Now i am selected as project engineer through Open channel(examination),but our HR Dept told us to Resign from my current post which is same as Project engineer with hiked salary. Since my service is continuous from Jan 2008 why i have to resign from my current post? Secondly, are we eligible for gratuity as i have served more than 5 years in same organization.

Vishveshwarya said...

Dear Mr. Negi,
I joined an Education Group on 14-July-2008 and on 10-July-2013, I received an email with a Inter-Office Note dated 9-July-2013 attached stating that my services are not required any more. Just 5 days before completion of 5 years.
I also wish to mention that
- I was on approved Summer Vacation from July 1st to July 21st, 2013.
- I still have 10.23 leave balance
- This termination is not at all on the basis of any offensive act.
This act clearly indicate an attempt to avoid Gratuity.
Kindly guide me about how to claim Gratuity.
Regards
-Vijay Negi

Govind Negi said...

Dear Vijay,

You can fight your case. If you have not resigned by yourself then you can claim your gratuity amount from your employer.

Send them a letter through registered post with AD mentioning about your employment tenure and letter by which your service was terminated and ask for gratuity amount.

Wait for their reply. In case they do not reply then send another letter through registered post with AD referring your last letter and asking revert else going to labour court to decide.

If no reply even then, approach labour office of your company region and file a case.

They have to pay gratuity

Govind Negi said...

You are eligible for gratuity. For reason of resignation please approach your HR. We should no what is their logic first

Govind Negi said...

Dear Chirag,

If you refer to FAQ 3, it clearly says that this ruling is passed by Madras High court and there is no amendment made in gratuity act so far

Which means that if you are in madras then you are eligible else not

Govind Negi said...

Dear Ankit,

Pleasure is mine.

Vishveshwarya said...

Dear Govind ji,
Thank you for your prompt reply.
I will follow your guidelines & will inform you with progress.
Thanks and Regards
-Vijay Negi

Anonymous said...

Hi,

I am working in MNC from Jan. 2009 to till date. I completed 4.6 Years. Actually company reducing the staff. If company terminated to me. Can I claim gratuity.
Thanks & Regards,
Ramesh

Anonymous said...

Hi Had worked for an MNC bank from 6th Dec 2003 upto 06/11/2008 i.e 4 yrs and 11 months at Mumbai. Can the Madras court judgement be useful to me?

Anonymous said...

Hi,
As we know that gratuity liability can be funded either through IT approved gratuity fund or Group Gratuity Scheme of Insurer.
Group Gratuity scheme having an advantage of providing gratuity on Anticipated service(Enhanced Death Benefit)through OYRTI (One Year renewable Term Insurance).
My Question is does IT approved gratuity fund also provide gratuity for anticipated service or not. and what about Insurance?

Govind Negi said...

Dear Friend,

I have not handled gratuity fund in my experience hence can not answer your query.

You can post your query on www.hrsuccesstalk.com for other HR professionals to answer.

Govind Negi said...

Yes, if company terminates you, you can claim for gratuity. Better you should speak to your HR department

Govind Negi said...

Only when you are in madras.

Appel Mahmud said...
This comment has been removed by a blog administrator.
Maks said...

Hello Mr. Givind Negi,

brilliant and informative article. can i ask a small question?

well, my company policy is 4.8 yrs. of continous service to be eligible for gratuity.i joined in jan 2009, and am currently serving notice period. i will complete 4.8 yrs in first week of september, and will leave the company in second week of september. so will i be eligible for gratuity... is my notice period also counted in gratuity period?

Maks said...

apologies for mis-spelling your name.

Anonymous said...

Below are my details, please let me know if I am eligible for Gratuity

DOJ : 15 Oct 2008
Date of confirmation : 15 Apr 2009
Relieving Date : 15 sep 2013(4Yrs 11 months)
Question based on FAQ 3 , Iam from Chennai
PF is deducted from DOJ.

Thanks in Advance
Prithi

Anonymous said...

Can an employee claim the gratutity amount after 10 yrs from leaving the service.Do we need to submit the forms for claiming the gratuity to the employer only or do we need to submit elsewhere.Do the employer has to separately get registered for Gratuity.

SAMBHAVNATH INDUSTRIES (I) PVT. LTD said...

i WANT TO KNOW IF THE COMPANY IS NOT WILLING TO PAY GRATUITY THEN WHAT WILL BE THE PROCEDURE TO CLAIM IT?

SECONDLY, I WANT TO KNOW IF THE COMPANY IS WILLING TO PAY THEN WHEN THE EMPLOYEE COMPLETES 5 YEARS AND HE/SHE CONTINUE TO WORK IN SAME FIRM WHAT IS THE RATE OF PAYMENT OF GRATUITY PER YEAR MEANS DO THE XCOMPANY NEEDS TO MAINTAIN ANY RECORD FOR IT

Anonymous said...

I WANT TO KNOW IF THE COMPANY IS UNDER PROCESS OF REGISTRATION FOR THE GRATUITY AND COMPANY MAKES THE DIRECT PAYMENT TO LIC INSTEAD OF APPROVED GRATUITY FUND.
THE AMOUNT WHICH WE DEDUCT AND PAID DIRECTLY TO LIC IS ALLOW UNDER THE INCOME TAX????????

Gautam Sharma said...

Dear Govind,

if an employee completed more than five years & he is not coming in company since January'13 & then he came in July'13 & submit his resignation. Then what will be his last drawn salary a). salary payable to him in January'13 b) present salary in July'13 which is higher than Jan'13 due to increase in DA?

regards

Anonymous said...

If an employee completes 59 months in a company as consultant and gets Form 16A then is he entitled to get gratuity if yes how much?

giri0711 said...

Dear Govind,
I have completed 5 years and 5 months in a company where i work due to some unavoidable circumstances i need to change my job. if i give a months notice to the Company. and serve the notice i will be completing 5 yr and 6 months, Ie i will be entitled for 6 years Gratuity. But in the case if the company relieves me from the job before the notice date. will i be eligible for the gratuity of 6 years.

Thanks for your wonderful insight on Gratuity Act

Regards,
Ganesh

Anonymous said...

WTF....Why are you wasting urselves here..

Anonymous said...

Very Very Informative Article. Thank You So very Much...(Krantivirsingh Rajput from MUMBAI).

Govind Negi said...

Dear Friend,

Well, as per gratuity act you are not eligible. But as per your company policy you are eligible.

Govind Negi said...

If you are in chennai (Madras) then yes, you are eligible.

Govind Negi said...

There is no deadline set by government to claim gratuity amount. You can claim. Please do mention reason of delay. Employer need not register for gratuity.

Govind Negi said...

Dear Friend,

It is legal obligation to pay gratuity if an employee completes 5 year. As soon as employee who has completed 5 years leave the company, employer should automatically pay his gratuity preferably along with Full and Final.

Employer can either get gratuity liability covered through LIC or make a provision in the accounts books for gratuity.

Govind Negi said...

There is no process of registration in gratuity. Amount paid to LIC can be shown as expense hence non taxable.

Govind Negi said...

Current salary i.e. at the time of leaving the company

Govind Negi said...

Consultants are not entitled for gratuity if they get paid consultancy fee with TDS deduction.

Govind Negi said...

if you complete 5 years 6 months then you can claim gratuity for 6 years else 5 years

Govind Negi said...

Dear Krantivir,

Thanks for your appreciation.

Anonymous said...

Thanks Govind,
For your valuable feedback

Anonymous said...

If an employee leaves the company and then he called back within 23 days in the same company then which hiring date will be taken the previous one or last one.

Anonymous said...

Hi,

Can employer pay in more than five installments for past service gratuity, say -what would be the tax treatment for employer contribution to sixth year installment of single premium towards past service gratuity.

Shashank said...

Hi Govind,

Went through the complete article and comments too and saw that many places CTC has been mentioned where employers normally include Gratuity. In my case, employer has included Gratuity as Salary components. Here is how my compensation letter is structured:

Salary Components
-----------------------------
Basic Salary
DA
Personal Allowance
Bonus
Retirement Benefits:
(i) Provident Fund
(ii) Gratuity

Total Fixed Salary (sum of all the above components).

Now in this case -
1) Can they deny gratuity, given that it is included as part of salary details, even if one leaves the company before 5 years completion?

2) It seems they are calculating Gratuity based on the current Basic + DA and probably saving it too. Are they still liable to pay the Gratuity on the last salary Basic + DA or can they pay just the sum of this line item (from salary) over the years?

3) Can they include Gratuity as part of Salary details?

Please let me know your views.

thanks,
Shashank

Anonymous said...

Dear Sir,
These days companies include Gratuity in CTC. In case I worked for 5 years and every year my basic increases and accordingly the Gratuity component. In such a case will I be getting gratuity as per my last drawn basic or as per the accumulated gratuity over a period of 5 years?

Govind Negi said...

Dear Friend,

Whenever you leave company, your gratuity will be calculated on Basic component at the time of leaving and not on previous basic components.

Govind Negi said...

Dear Shashank,

Here are answer of your queries sr no. wise:

1. Gratuity is payable only when an employee completes 5 years of continuous service hence you will not be eligible for gratuity if you leave the company before 5 years. Gratuity is part of your CTC and not salary.

2. Gratuity is calculated on last basic drawn and not linked with previous Basic salary components.

3. Please refer FAQ 11 of above article, which will answer your query in detail

Govind Negi said...

Dear Friend,

Please explain your query in more detail. I am not clear.

Govind Negi said...

This depends upon your appointment letter. If you have been issued a fresh employment then it can be considered as continuous service

Anonymous said...

Dear Govind
What about Section 4A of Gratuity Act

Sheldon said...

Dear Govind,

I have been working in a company for 5 years and 10 months (inclusive of 6 months break). I took the break about 3 years back and I was in leave with out pay. Once I came back, I continued with same EMP ID, PF account and everything. It wasn't considered as a break of employment. Now if I leave the company, am i eligible for Gratuity, or do you see any possiblity employer brings up the break put an end to the gratuity payment. Is there any Gratuity act to clarify this.

Anonymous said...

I have joined a company on February 19, 2009 and have been retrenched in 31st July 2013. Should I get the gratuity from the employer? If so what is the way out.

Mithilesh Awate said...

Govind Sir,

Thanks for informative article. Sir I will be completing 5 years in my current company on 11 Aug 2013, I am getting job offer in other company, so if I resign from my current company on 12 Aug 2013 will I get the Gratuity.? I will be completing 5yrs 1 Day on 12 Aug 2013. Please advice.

Govind Negi said...

Dear Mithilesh,

You have already completed 5 years hence you are eligible.

Govind Negi said...

Can i know the reason of retrenchment? Also i can understand that you have completed 4 years and more than 5 month

Govind Negi said...

Dear Sheldon,

You are eligible.

Anonymous said...

Hi Govind,
Stumbled upon this great post and discussions around gratuity. Wondering whether you have any suggestions on my case. I have not been able to get a concrete answer till date.
Joined this Indian subsidiary of a US multinational IT company in Bangalore in 2003 and left last year while in US. All these years I had been travelling to US, used to stay for a couple of months and go back to Indian base. The US deputation used to transfer the Indian payroll to US payroll (two payrolls never running simultaneously). The total duration I worked only in India was less than 5 years, but the last I was on Indian payroll was Jun 2009 (remember I joined in Jan 2003).
Now, how does Gratuity work in this case? I was not surprised when the company refused to pay any Gratuity citing it's policy of not paying any Gratuity to those resigning onsite. I have this feeling this is not right. And if this is not right, I want to pursue it further. Not very sure about Gratuity rules and being in US right now doesn't help in approaching any labour lawyers.
Please advise.

Thanks,
Nitin

Mithilesh Awate said...

Govind Sir,
I will be completing 5 years on 11th Aug. HR from other company is saying that as per rule if you complete 4yrs 8 months then also you are eligible for gratuity. I said I will confirm from expert and let you know. Sir, please advice.

Anonymous said...

Thank you.


Regards,
Priti

Anonymous said...

Will a posting overseas within the same company be considered as a termination of employment and therefor eligible for gratuity payment if the employment was over 5 years?

Anonymous said...

Dear Sir
I have joined a govt psu and have 9 years service. But after initial 3 years of service i have dies non(no work no pay) for 4 days as part of a strike called by unions. Whether the 4 days will be considered as break in service ? So whether I will be getting gratuity for whole 9 years or only 6 years after which i am having 5 years of regular service?

Anonymous said...

Sir- wanted to know if a person works in India for 8 years and then relocates to US for 3 years, Is the employee eligible for gratuity while relocating - pls clarify.

Thanks

Anonymous said...

Thanks For this Article.

My query is - I've been working in this organization for 4.7 yrs. and about to complete 5 yrs in Dec'13. The concern is When I joined this company,the name of the company was different now company have changed its name in Registrars of Company. My PF Account is same. Will I still be eligible for Gratuity? Also would you want to share any exceptions to this.
Your Reply is greatly appreciated.

Thanks,
Deepak

Govind Negi said...

Dear Deepak,

Change in name of company do not take gratuity right from employee if employee completes 5 years. Hence you are very much eligible for gratuity after Dec 13

Govind Negi said...

Dear Friend

As you have already completed more than 5 years i.e. 8 years in india based company before moving to US based company then you are very much eligible more gratuity.

Now question come did you got a fresh employment in US based company or simply relocated and from which company you will get separated.

But in any case you are eligible.

Anonymous said...

4 days should not be considered as break in service as it was not your fault

Govind Negi said...

No, but it is important to note whether you are moving as fresh employment or simple company to company movement. In first case you will not be but in second case you should be

Govind Negi said...

Dear Nitin,

Well, i may not be able to give you exact answer of your query but will try to solve this.

Request you to give me some information:

Which company rolls you are at---Indian company or US and tenure on these rolls.

this will help me to understand your case

Govind Negi said...

Dear Mithlesh, If you are completing 5 years on 11th August 13 then what is the worry. Only 2 days are left. So you are eligible.

But please note, employee must complete 5 years to avail gratuity.

Sanjeev Bhatt said...

hi ,

I have joined the one IT company on 29 sept 2008 and resigned from current organisation on 26-july-2013 due to some emergency and couldn't complete my 5 years to claim my gratuity .

Can i claim or fight or case to get the gratuity based on 240 days clause .

Somkumar Saini said...

Hi

I have join a company in sept-2010 on parament basis but the company closed on aug-2013.Can we claim for gratuity

sk saini
somkumar.dg@gmail.com

Mithilesh Awate said...

Thank You So much :-)

Simmi said...

Hi sir,

I was working with a co based in noida, the co size was around 100 employees. I resigned from the organisation in January 2013 after serving them for 5 years and 2 months. On my relieving day i asked the finance dept about my gratuity calculations, and they told me that there is no provision of giving gratuity to the employees even if they have served for more than 5 years. My question, is it really possible for me to get the gratuity amount and if yes what procedure should be followed by me.

I will be delighted by your response.
Thanks
Simmi Sinha

Anonymous said...

Hi Sir,

I was working for a Bank in Dubai,the Co Size was around 400 -500 employees.I resigned from the Co in Dec 2012 after serving for 4 years and 9 months.As I was being told that I will be receiving the gratuity figures within 30 days from the date of my resignation,it took around 8 months for the Co to pay off my gratuity.

I have not accepted the figures since I have a loan to pay to the bank.Apart from the gratuity figures ,I still have to pay around 2000 dhms to the Bank.

My question,is the bank owes me 8 months interest on my gratuity and if yes what procedure should be followed by me to claim the interest rate.

Thanks

Vinola Pires

Govind Negi said...

Dear Friend,

I may not be able to comment on gratuity act in Dubai. In india, company need to pay interest if they dont pay within 30 days of gratuity eligibility.

Govind Negi said...

Dear Simmi,

Company is liable to pay you gratuity amount as you have completed continuous 5 years of services.

Please send a letter through registered post mentioning your employment details and asking for your gratuity amount referring Gratuity payment act.

You can also paste eligibility clause from the Act. You can download act from link provided in this blog post.

If no response, then send second letter through registered post with AD, referring first letter and mention that you may approach to competent authority for your gratuity payment.

If still no response then approach competent authority of area where your company is located. Find labour office.

I am sure, after first and second letter, your employer will respond

Govind Negi said...

Dear Som,

You are not eligible for gratuity.

May i know the reason of close down.

Govind Negi said...

Dear Sanjeev,

5 years completion of continuous service is mandatory to claim gratuity.

Simmi said...

Hi Sir,

Thanx for the response.

I will send them a registered post letter.

If any queries i will definitely contact you.

Thank you once again.

Kind regards
Simmi

RIYA said...

Hello sir ,

Thanks for an article ! I have worked in a company for 4 years 11 month . Can i claim the gratuity?

Anonymous said...

I had same doubt.. so just need more clarification..

I worked in a company for 5 years, when i joined in 2008 the company had 9(or may be 10, dont remember) employers. Then for next 2 years it had 15+ employers.. But in last 2 years the count was bellow 10 and when I left the company the count was 9 including me. So company still has to pay gratuity ?

Its been more than 1.5 month since i left that company. I have not got any gratuity yet.. They had told me that they will let me know if it is applicable.. So i wanted to clarify this before contacting them.

Thanks

Amit said...

Dear Sir,

Its very informative, you covered it every important points in simple way.

I have a question for you - I have completed 5 yrs as of now in my company which includes 15 months of contract as well. Am i eligible for gratuity? Will the contract period be included in this 5 yrs ?

regards,
Amit

Govind Negi said...

Dear Riya

You are not entitled for gratuity.

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