Animay Singh
Biography
An Overview of Procedural Norms
The Payment of Gratuity Act, 1972 read with the Payment of Gratuity (Central) Rules, 1972 provides for a complex procedure when it comes to application for and processing of gratuity payments. Procedural norms under Section-4 of the Act stipulate that gratuity shall be paid to an employee on the termination of his employment after he has rendered continuous service for not less than five years.
Section 2A of the Act explains the various caveats which qualify for continuous service of an employee as follows:-
An employee shall be said to be in continuous employment if they have been in uninterrupted service during the period. This includes service which may be interrupted due to sickness, accidents, leave, absence from duty without leave (that is not absence in respect of which an order has been passed treating the same as a break in service), lay-off, strike, lock-out or a cessation of work that is not caused by any fault of the employee.
Employees who do not fall under the above clause for any period of one year or six months shall be deemed to be in continuous service under the employer if :-
(a) In case of 1 year, if the employee has worked for 190 days in case of employees employed below the ground in a mine or in an establishment that works for less than 6 days a week and 240 days in all other cases. This formula is used in the 12 calendar months preceding the date concerning which the calculation is being made.
(b) In case of six months, if the employee has worked for 95 days in cases where the employee is employed below the ground in a mine or in an establishment that works for less than 6 days a week and 120 days in all other cases. This formula is used in the 6 calendar months preceding the date concerning which the calculation is being made.
(c) For employees in seasonal establishments who do not fall under the scope of (a). They shall be deemed to be in service for any period of one year of service if, during such period, the employee has worked for not less than 75% of the number of days the establishment was in operation.
For (b), it must be understood that the number of days mentioned therein includes the days on which the employee has been,
- Laid off
- On leave with full wages earned in the previous year
- Absent due to temporary disablement
- Maternity leave in case of females
For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned. Rules 7 and 8 require that an employee who is eligible for payment of Gratuity shall apply for it within thirty days from the date the gratuity became payable, in Form I to the employer. Within fifteen days of the receipt of an application, under Rule 7 for payment of gratuity, the employer shall issue a notice in Form L to the applicant employee, nominee or legal heir, as the case may be, specifying the amount of gratuity payable and fixing a date, not being later than the thirtieth day after the date of receipt of the application, for payment thereof. Form J and Form K are to be used in case of nominee or legal heir, respectively.
Presently the definition of appropriate Government under Section-2(a) of the Payment Gratuity, 1972 is Central Government in almost all cases, especially if an establishment has branches in more than one state. Thus, in cases relating to disputes over claims the Central Government is generally involved.
In the above description of procedural norms provided for under the Central Act and Rule, most states have their own respective rules relating to payment of gratuity which only adds to an already complex set of procedural norms. This involves a great deal of due diligence and paperwork, especially in large undertakings with establishments spread over different states. Therefore, it is clear that the above process needs to be simplified and made electronic, the following section examines different ways in which the same can be achieved.
Easing the Procedural Burden
The first recommendation for reform would be making the maximum period for payment of gratuity 30 days from the last day of work. In cases of superannuation, the stipulation can be altered to ensure that the gratuity is paid on the last day of work. Both of these changes would require amending and altering Section-4 of the Payment of Gratuity Act, 1972 or Section-53 of the draft Code on Social Security, 2019.
Another change that can be brought in to reduce the procedural burden is concerning cases of disputed claim. The procedure described in the above section can be followed wherein the employee can claim from the employer. However, the law should mandate that the application procedure should be moved online to avoid the excessive paperwork the current system generates. Access to the online platform should remain till the employee’s dues are settled, this must be specified as it is standard procedure to cut off access to online HR platforms when an employee leaves an establishment. This is because a great deal of manpower is dedicated to handling post-employment PF and gratuity claims in establishments. The above system will also help resolve the issue of unclaimed gratuity as the mandatory payment of gratuity within 30 days will ensure the sum is credited to the employee. The paperwork aspect is also addressed by the above system as currently, every employee who leaves has to file Form I leading to a large number of forms to be processed in cases of large establishments.
A similar procedure applies in case of Form F after one year of service and thus an online system would resolve that problem as well. Another reform that can be fruitful is making it mandatory for the employer to update the nominee regularly. This will ensure that disputes relating to the same do not repeatedly arise. In cases where a minor is made nominee it should be made mandatory that there exists a relationship of guardianship. This will prevent disputes from arising and remove the necessity of making payments to the controller while the minor remains underage.
What other reforms do you believe can be made to reduce the procedural burden under the Payment of Gratuity Act, 1972?
Leave your thoughts in the comments below.
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Varsha gwalani ex.employee of navjeevan coopbank main branch ulhasnagar want to claim against gratutity n pension n vrs retirement benefits after resignation complete 15yrs don’t get all theses be9becaz of bank fraud management. Now I hiring legal services
an society registered under society act 1860. whether payment of gratuity act applicable ?
Respected Sir/Madam,
We have contract employees working under National AIDS Control organization ,MH &FW,GOI through State AIDS Control societies registered under society act 1860 with consolidate honororium .Many of employees has completed more than 18 years of service under the same organization without any break of service.
Query is that:-
1- Are such employee are entitled to get Gratuity ?
2- If yes, then then the same is payable by the concerned society ?
3.An society registered under society act 1860. Whether Payment of gratuity act applicable on this yes or no. Send also notification for the same.
-VENU SUDARTHI
Hi sir,
As per the definition of employer under the Payment of Gratuity Act, 1972 there is no prima facie indication that it is applicable to societies registered under the Societies Registration Act, 1860.
Regards
Animay
Hi sir,
I have completed 4 yrs and 11 month. But I am on leave without pay from last 5 month.
Am I eligible for gratuity or not?
Kindly confirm
Hi,
Section-2A of the Payment of Gratuity Act, 1972 defines continuous service as a period of uninterrupted service that includes service interrupted on account of sickness, accident, leave, absence from duty without leave, lay-off, strike or a lock-out or cessation of work not due to any fault of the employee. Therefore, you would be eligible for gratuity even if you are on leave without pay.
Regards
Animay
Hi Animay,
in the above case, stipulated period of 5 years is not completed.
Pls throw some light as to how Ms. Priyanka is eligible.
Regards
Hi,
Her question related to whether 5 months of leave vitiates the period of continuous service, the answer was solely confined to the facts of the case. Section-2A clearly states that continuous service includes service which may be interrupted on account of sickness, accident, leave.
Regards
Animay
After retirement and lodged gratuity claim to labour court for early settlement but then, company lodged dispute for misdeed, loss etc. what is/are rules for settlement. When hearing for redressal at labour court, is it a rules for depositing the gratuity amount at labour court and others rules in this matter.
Hi,
A court of law may mandate depositing of gratuity as part of its discretionary power based on the pleas of the parties
Regards
Animay
Hello Sir,
Greetings..!!
I have worked 02 years and 01 month in the company.
So am I eligible for the gratuity??
And How long you should work in Company for gratuity????
Hi,
Eligibility for gratuity under the Payment of Gratuity Act, 1972 requires continuous service of 5 years. So as of now your service of 2 years and one month is insufficient to claim gratuity.
Regards
Animay
Is 4.7 years of continious service treated as 5year service in gratuity calculations
Hi,
Eligibility for gratuity under the Payment of Gratuity Act, 1972 requires continuous service of 5 years. So as of now your service of 4 years and seven months is insufficient to claim gratuity.
Regards
Animay
Co. raised complaints of loss, misuse of power etc. after usual retirement by letter and submission of gratuity claim at labour court for non payment in stipulated time as per norms. What are rules for its settlement at the court, and also at the time of hearing which things/matter will have to present at the court by parties.
Hi Animay,
I have two queries….
I worked with Canara Bank from 10.Nov.2014 to 04.June.2019, for a period of 4 years 6 months and 24 days.
A………Section 4 (2) of the Payments of Gratuity Act, 1972 says “For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned.”
So, Am I eligible for Gratuity as I have completed more than 4 years and 6 months of service ?
B……..Section 2A 2(a) (ii) of the Payments of Gratuity Act, 1972. Continuous Service,
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-
Two hundred and forty days, in any other case..
What is the interpretation of “preceding the date with reference to which calculation is to be made” ? Is it the last working day of the employee wef which Gratuity is payable ?
Hi,
I will address both your queries with reference to relevant statutory provisions. The first provision we need to interpret is Section-4 of the Act, clauses (1) (2) (3) read together require that gratuity shall be paid to an employee on the termination of his employment after he has rendered continuous service for not less than five years. When an employee is not in continuous service for one year or six months he/she shall be deemed to be in continuous service, if the employee in the twelve months preceding the date with reference to which the calculation has to made, has worked not less than 240 days, in any other case. For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned. Therefore, it is difficult to answer conclusively in your case as we would have to know how many days of your 4 years and 6 months of service comes under the scope of continuous service.
The above explains the general framework applicable in your case. Section-2A explains the various norms pertaining to calculation of continuous service. With regards to your question on the ‘preceding date with reference to calculation’ it can be understood with reference to Section-4(1) as stated above, the date may be fixed based on whether gratuity is being paid due to termination, superannuation or death/disablement. Gratuity does not become payable as soon as you become eligible, it is only payable on the occurrence of the aforementioned three events.
Regards
Animay
I have two questions :-
I have completed 4 years and 8 months in my current organization. We have 5 days working, As i have completed more than 190 days in the 5th year will i be eligible for gratutity ?
Does completing 4 years and 9 months make be eligible for gratuity payment in case 4 years and 8 months don’t suffice
Hi,
I will address both your queries with reference to relevant statutory provisions. The first provision we need to interpret is Section-4 of the Act, clauses (1) (2) (3) read together require that gratuity shall be paid to an employee on the termination of his employment after he has rendered continuous service for not less than five years. When an employee is not in continuous service for one year or six months he/she shall be deemed to be in continuous service, if the employee in the twelve months preceding the date with reference to which the calculation has to made, has worked not less than 240 days, in any other case. For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned. Therefore, it is difficult to answer conclusively in your case as we would have to know how many days of your 4 years and 6 months of service comes under the scope of continuous service.
The above explains the general framework applicable in your case. Section-2A explains the various norms pertaining to the calculation of continuous service. With regards to your question on the ‘preceding date with reference to calculation,’ it can be understood with reference to Section-4(1) as stated above, the date may be fixed based on whether gratuity is being paid due to termination, superannuation or death/disablement. Gratuity does not become payable as soon as you become eligible, it is only payable on the occurrence of the aforementioned three events.
Hello,
I am retired employee of society registered under society registration act 1860. At the date of notification (06.09.1997) there was only 16 employees working out of which 8 were direct recruited and rest 8 were recruited by deputation.The society paid salaries and other allowances to all 16 employees.
Now, is the gratuity act 1972 is applicable on the society or not by seeing the clause 2(e). Please answer.
Because the society authorities doesn’t count the deputed employees at the strength of the society.
Hi Gopesh.
Employees on deputation are also eligible for gratuity as long as they are on the rolls of the company. Therefore, if the 8 deputation workers were directly on the rolls, then the Gratuity Act, 1972 will apply since the headcount is more than 10 employees.
Thanks