The organization that I work for, has Gratuity indicated (on a monthly basis) in the salary structure. It is though, not paid out on a monthly basis but settled as per The Payment of Gratuity Act.
I would like to know if:
1) This being the case, upon separation, even if the employee has not completed 5 years in service as on the last working day, would he / she be entitled (from a legal perspective), to receive payment against this component for the number of months worked. For example, if the monthly gratuity quoted in the employee's salary structure is Rs. 1,000/- and the employee worked for 12 months as on the last working date, would he / she be entitled to receiving Rs. 12,000/- upon exit against this 'Gratuity' head??
2) We also have expats working in our organization and their salary structure, while they work for the Indian entity, also includes Gratuity (quoted on a monthly basis). Expats do not appreciate the fact that as per 'The Payment of Gratuity Act', the accumulations against this head can only become eligible to be paid to them upon their completing 5 years of continuous employment with the Indian entity. Since most Expat tenures are for 1-2 years, they consider this aspect to hit their net take home pay as well as consider the statute to hit them unfavorably from a financial perspective. Now, we are considering letting the employees getting entitled to payment against this head (in case they exit / leave us) at lets say, 25% upon completion of two years, 50% of this accumulation if they complete 3 years in employment, 75% for 4 years and 100% upon completion of 5 years and onwards. We also see that this may have some retention value since 2 years is a relativley more practicable than 5 years from the employee's perspective. Can anyone guide me with inputs on what they are doing in their respective organizations around this?
From India, Ghaziabad
6I would like to know if:
1) This being the case, upon separation, even if the employee has not completed 5 years in service as on the last working day, would he / she be entitled (from a legal perspective), to receive payment against this component for the number of months worked. For example, if the monthly gratuity quoted in the employee's salary structure is Rs. 1,000/- and the employee worked for 12 months as on the last working date, would he / she be entitled to receiving Rs. 12,000/- upon exit against this 'Gratuity' head??
2) We also have expats working in our organization and their salary structure, while they work for the Indian entity, also includes Gratuity (quoted on a monthly basis). Expats do not appreciate the fact that as per 'The Payment of Gratuity Act', the accumulations against this head can only become eligible to be paid to them upon their completing 5 years of continuous employment with the Indian entity. Since most Expat tenures are for 1-2 years, they consider this aspect to hit their net take home pay as well as consider the statute to hit them unfavorably from a financial perspective. Now, we are considering letting the employees getting entitled to payment against this head (in case they exit / leave us) at lets say, 25% upon completion of two years, 50% of this accumulation if they complete 3 years in employment, 75% for 4 years and 100% upon completion of 5 years and onwards. We also see that this may have some retention value since 2 years is a relativley more practicable than 5 years from the employee's perspective. Can anyone guide me with inputs on what they are doing in their respective organizations around this?
From India, Ghaziabad
Gratuity is an amount payable by the employer to an employee when he leaves the company(employer) after a long and meritorious service. It was just to give a specific definition as to what constitutes long service that the qualifying service of five years was fixed. Still the very purpose of the Payment of Gratuity Act is to gift an amount (for that also a specific meaning has been given) to an employee who retires or otherwise leaves the company after a certain period(five years) of service. It is NOT A PART OF SALARY at all. But the new generation establishments show it as a part of REMUNERATION, perhaps to show the salary a little handsome and to attract (or rather cheat, I believe) employees. Since gratuity is payable exclusively by the employer and that also within 30 days of it becoming due even if it is not demanded by the employee, no recovery in the form of "contribution" from salary is permitted in the case of gratuity. At the same time, if you give an appointment order stating a gross salary including an element of gratuity and deduct it from the salary every month, it will become payable even if the employee has not completed the qualifying period of five years. This is because, gratuity is not an amount recoverable from employee and any amount recovered from the salary will be given back to the employee in the same or other forms, like Provident Fund, ESI or Welfare Fund etc.
Please see the article in the following link.
Madhu.T.K: CTC Vs BTC
Regards,
Madhu.T.K
From India, Kannur
Please see the article in the following link.
Madhu.T.K: CTC Vs BTC
Regards,
Madhu.T.K
From India, Kannur
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc