pay gratuity

In this article, Sanghamitra Sengupta discusses steps to take when your employer refuses to pay gratuity.

Understanding Gratuity

It has always been rightly said that loyalty is a trait that must be awarded. Employers also believe in this principle and show gratitude to their retired employees for their service by giving them gratuity, a monetary payment. It is basically a type of a ‘retirement benefit’. But, an employer is not bound to pay gratuity to every employee post-exit. An employee must have worked with the employer for a minimum of 5 years to avail this benefit. The reason for exit from the job does not matter as the reason could vary from something as natural as age to something caused due to his own volition such as a better job opportunity.

Is gratuity available in both public and private sector?

Yes. In India, it is mandatory for every employer, be it in the public sector or private sector, to pay his employee gratuity provided the employee has completed 5 continuous years of work.

Is there any law that protects my right to gratuity?

Yes. Payment of gratuity is ensured by The Payment of Gratuity Act, 1972, thus making it mandatory under a statute. The act is applicable to every legal place of employment such as mines, factory, shops, oil field, plantation, railway company, and ports. But, it must be noted that these employments must have had or have at least 10 employees, on any day of the preceding one year.

What happens if I die before completion of 5 years of service?

An employee is entitled to gratuity payment even in the case of death. In the case of death, 5 years of continuous service will not have to be proven and the gratuity will be awarded to the nominee. In case of absence of nominee, the legal heirs of the deceased employee will receive the gratuity. It must also be noted that sometimes 5 years of service is not completed due to disablement, meaning, permanent inability or incapacity to do the work which one was capable of doing before an accident or disease. In case of disablement, gratuity is paid even if 5 years of service is not rendered.

How many days must I wait for to receive my gratuity payment from my employer?

  • Before we delve into the laws, you need to remember that every employer gets 30 days post your resignation, retirement or firing from the job to pay you gratuity.
  • You or anyone authorized by you can send an application to the employer for payment of the gratuity in these 30 days.
  • An application must be made to the employer within 30 days of exit from job to the employer in Form ‘I’.
  • A nominee of the employee who is entitled to gratuity on behalf of the employee from the employer has to give an application to the employer within 30 days of exit from work, in Form ‘J’.
  • After receiving this application, your employer is bound to respond to this application within 15 days. The employer must verify the application and if the claim is found to be admissible based on this verification, he must issue a notice to you, in Form ‘L’ notifying the calculated amount of gratuity which will be awarded by him.
  • The employer must also fix a date in this notification which cannot be after the 30-day term stipulated by the act. This notice must be forwarded to the controlling authority having jurisdiction in that area.
  • The provision of an application to the employer does not imply that his liability to pay gratuity starts only when you send an application as an employer is bound to pay gratuity regardless of an application from the employee.

After completion of 30 days, can I make my employer pay extra gratuity?

After completion of 30 days, the employer has to pay you not only the gratuity amount but also simple interest incurring on it. This simple interest rate cannot exceed the rate imposed by the Central Government though.

Where can I report in case of non-payment of gratuity

  • Section 3 of the Payment of Gratuity Act, 1972 provides for a ‘Controlling Authority’. Different areas have different controlling authorities that ensure the effective administration of this act. The act gives the controlling authority the status of a ‘quasi-judicial’ body which implies that it is empowered to adjudicate disputes arising out of non-payment of gratuity.
  • The Controlling Authority may issue a notice in Form ‘O’ to both the applicant employee and the employer. The two parties will then have to appear before the authority on a specified date, time, and place, given in the notice.
  • If the employer fails to present himself or an authorized person before the authority, the authority may proceed to hear the case and determine the employee’s application ex parte.
  • If the employee fails to appear before the authority on the specified date, then the application will be disposed of.
  • The authority, on hearing the case and examining the facts may pass a direction and issue a notice to the employer if it is established that employee is entitled to gratuity. A notice is served to the employer in Form ‘R’.  
  • Generally, an Assistant Labour Commissioner of a state is appointed as a controlling authority in a state with the hearing taking place in the office of the Labour Commissioner. If you have been denied gratuity payment by your employer, you can file a complaint under Section 8 of the act, against the company. The controlling authority, on hearing both sides, if satisfied with the employee’s stance, can direct the employer to pay the gratuity that is due along with the interest on it.
  • If an employer fails to pay gratuity amount along with interest 30 days after the controlling authority has directed it to do so, the appropriate government, be it Central Government or State Government, whoever is concerned with the employing organization, will authorize the controlling authority to start prosecution against the employer, within 15 days.

The forms can be accessed here.

Benefit of Condonation

An employer cannot deny gratuity to the employee on the ground of limitation. No doubt, there is a specified period of 30 days for an employee to file a notice to the employer but a claim for gratuity will never be invalid solely because it was not presented within the specified time. An appeal against the order of the Controlling Authority, however, has to be filed within the specified time and cannot be condoned.

What is the punishment imposed on my employer if he refuses to pay gratuity?

  • Section 9 of the act provides for all penalties that can be imposed on your employer by the Controlling Authority. Your employer will be liable for imprisonment for non-payment of gratuity – up to 6 months which may be extended to 2 years if the controlling authority deems it necessary.
  • It is not necessary for the employer to be imprisoned for 6 months as, if the controlling authority is of the opinion that a lesser term of imprisonment would suffice, the provision of 6 months of imprisonment would not be applicable.
  • A penalty amounting to imprisonment of 6 months could also be imposed on your employer if he knowingly makes a false statement or representation to avoid payment of gratuity.

Gratuity Insurance

Under Section 4(A) of the Payment of Gratuity Act, 1972, every establishment that is bound by law to pay gratuity must get a gratuity insurance. This compulsory insurance will ensure that there are sufficient funds available with the establishment to pay employees their much-deserved gratuity. There are plenty of Indian banks that offer gratuity insurance to employing establishments, helping banks maintain a sufficient fund as well as earn gains on the invested money.

However, this law takes a turn because it only becomes mandatory when the government releases a notification with regard to the insurance in the Official Gazette. So far, there has not been any notification. However, states are forming their own compulsory gratuity insurance rules.

As far as employees are concerned, this insurance is highly beneficial to them for it ensures that in times of a financial crisis or economic losses, the company will still have to pay gratuity to the employee. The employer cannot justify nonpayment of gratuity by citing bankruptcy or financial losses. The rule of compulsory gratuity insurance was introduced to safeguard employees in all sorts of situations, even when their employer has to shut down the establishment.

Payment of Gratuity after death

Gratuity can be received by the employee’s legal heir, in case of death of the employee. Gratuity received by the employee’s legal heir will be taxable under the head “Income received from other sources”. The legal heir must give an application to the employer, demanding gratuity payable to him, in “Form K”.

Gratuity is most definitely exempted from tax up to a certain limit, as per Section 10 (10) of the Income Tax Act. Section 10 (10) basically divides employees into three categories for the purpose of exemption of taxation on gratuity. The categories are:

  • Government employees: Gratuity received by government employees is not taxable
  • Employees covered by Payment of Gratuity Act: total gratuity that is exempted from taxation is the least of these 3 amounts- 15 days salary for each completed year of service provided the employment is more than six months OR INR 3,50,000, OR the gratuity actually received. Gratuity received in excess of the least of the amounts mentioned here will be taxed.
  • Other employees: Total gratuity that is exempted from taxation is the least of these 3 amounts- Half month’s average salary for every completed year of service OR INR 3,50,000 OR the gratuity actually received.

 

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

15 COMMENTS

  1. I was working in limited company for 9 yrs & 7 months and left the organisation without resigning. My date of cessation of membership was 30.4.2007 as per PF scheme certificate. Till date I have not claimed my gratuity since I had rift with my superior. Pls advice me how to claim my gratuity ?

  2. I was an employee of a PVt Ltd co for 10 Years in service. I left the organisation in Feb 2016 but till today I was denied my right to get Gratuity in spite of repeated follow up for past 4 years. One of the Director response is that he is no more on The Board of Director now on the same organisation but he was Director when I left this co.. Pls guide me if all formal Directors are liable for this statutory payment to employee. Pls guide me with section under which this is possible.

    Regards

    Vivek Mate

  3. Hi,
    I am Punit Negi . working hollister medical India Pvt. Ltd. last 8 years .My Company is not giving Gratuity after completion of 8 years .They have directly denied us and say that your notice period is 3 month but last 10 years no body gave 3 month notice period. pl help me what i Do??

    • My gratuity has been withheld for filing a private complaint instead of police complaint for embezzlement of Government money by 13 colleagues. I have not caused any loss of revenue instead my action would enable recovery of embezzled amount. Whether action of Commissioner of Commercial tax Bangalore is right in withholding my gratuity.

  4. Sir i have been working for almost 16 years in private job, when I have resinged from the service, My employer is threatning me that he will not pay the gratuity amount at any cost, do whatever you can do or go to consumer court , I am ready to fight the case but won’t give you a single penny, nobody can able to influence me to pay the gratuity. Please tell me what to do

  5. Hi Sir ,
    I worked for almost 7.5 years 11-02-2012 till 15-06-2019,in private Limited company Telengana, Hyderabad ,Al of sudden my process has been moved from India company gave me 45 days salary and removed from the organization, I resigned job because my process has been winded up from India and they told me that they will pay my gratuity settlement will be this month , today when I ask they are saying as challenge that gratuity is not mention in offer letter.. What should I do please update me back..

  6. My Company is not giving Gratuity after completion of 4 years 10 months.They have directly denied us we are 5 employee we are not getting the benefit.
    They had started depositing salary by cash so that they can show we are not on their Payroll.

    Kindly some body advice me.

  7. I am Mr. Sudhakar R, an ex-employee of Akshayah Matriculation Higher Secondary School, No 7, LIC colony, Tansi Nagar, Velachery, chennai – 600042. Website address: http://www.akshayah.co.in I did not get the graduity amount for my service period of 13 years (2005 – 2018).I have submitted my resignation letter (prior three month notice) on 03 Jan 2018 clearly mentioning the employer to pay my graduity. I have resigned on 21 Apr 2018. I have mentioned about non payment of graduity dues to my employer on my last working day with a formal letter duly signed by the school office authority since there was no Principal or Headmaster in service in the school at that time. I have filled an RTI application on 18 apr 2019 followed by RTI first appeal 19 june 2019 to submit my salary slips for 13 years for me to calculate the graduity and provident fund contribution of the employer as it is a very low contribution from the employer which is reflected on my PF passbook. The employer did not answer my RTI application and RTI first appeal. I seek your help in getting my graduity amount from my employer at the earliest without any furthur delay. Regards Sudhakar

  8. I have completed 4 years 8 months 24 days in a company, please suggest if I am eligible for graduity (as in continuous service working days are counted).

  9. Sir
    I was assistant in civil court for more than 7 year in jharkhand govt but I resigned from that post and joined new post in other state govt.my question is that is I am able for gratuity will they pay me.
    2 ) 4 month has passed since I resigned and till know I have not applied for gratuity.
    Is there any time limit boundaries.
    Can I now file my application for gratuity to my previous organisation.

  10. 20-02-2019 Bangalore

    I have a peculiar type of issue regarding gratuity.
    The issue: If the gratuity is not paid fully at the first instance due to limitation under section 4(3) then the remaining balance should be paid after enhancement under section 4(3).
    Note: Section 4(2) is my statutory right according to the formula fixed therein.
    Whereas section 4(3) has a ceiling. This section 4(3) should be sub
    servient to section 4(2)
    till the entire gratuity is paid whether in the first instance or in the second instance after enhancement

    under section4(3). Srction 4(2) is supreme and has implied guarantee for full payment.
    Accordingly I filed PIL in Karnataka High Court a PIL No.26538/2018. But the High Court dismissed
    my petition on 31-10-2018. Anybody can see the text of the decree from the website.

    Kindly tell me where to file my petition to get justice. I am entitled for 100% of gratuity under section 4(2) irrespective of ceiling under section 4(3). What to do next? Just accept the defeat?
    I want to fight for justice for larger interest of retirees.

    Can I file my petition individually in National Tribunal? Kindly give its address.
    Hope this is a challenging issue for all retirees. Respond by e-mail 9844200688 PF No.1883070 in S B I

  11. Dear sir/ madam,

    I am writing on behalf of my father as he works as a society manager he has given his resignation on the 01st October after 10 or more years of service, but his employers have denied him the Gratuity.

    He is officially the only employee of the society as the others like security, house keeping etc are all contracted by the society through contractors

    Will he still be eligible for the gratuity pay and if yes please guide us further for the same.

    Many thanks

    Huzaifa Salmin

  12. Hi Sir,

    My Dad B. N . Narayanappa he worked for 6.5 years in top most Named security Agency Unique Deductive and security agency pvt. Ltd which is located in Bangalore Vijay Nagar. They are telling him they won’t give any benefits like Gratuity for employees who work for more than 5 years, when I called to his HR he said my Dad will get Gratuity. But after few days when I am trying to call for his number not picking call once I went to his office with my dad he is telling us they won’t pay any gratuity to him. I just wanted to know can we take legal action on this security agency please suggest us my dad he have all his documents like salary slips and ID card they use to deduct PF and ESI for him we have all documents
    Thanks and Regards,
    Shiva Kumar Yadav
    Mob:- 8792241451
    Email:- [email protected]

  13. My employer did not respond to my request dt. 8-1-1998 to pay gratuity, PF & Pension. In 2013, Hon’ble HIgh Court ordered employer to pay all service benefits to me ‘as per law & as per eligibility’. Employer paid only principal amounts of gratuity & PF without interest. On my complaint, ‘Controlling Authority’ issued notice to employer in 2015. Employer paid interest from 1996 to 2013 only. ‘Controlling Authority’ ordered employer to pay difference in interest from 2013 to 2015 which was also paid. But my request for prosecution of employer for withholding my gratuity for 17 years was turned down by ‘Controlling Authority’ without giving any reason. Appellate Authority ignored my request to order prosecution of employer without giving any reason. I think both have breached their authority by not ordering prosecution. Should I approach court for redressal?

LEAVE A REPLY

Please enter your comment!
Please enter your name here