Dear Poonam,
I think Mr. Rao has clearly explained the position with the extract of the relevant section of the Act. When the termination of employment leading to the payment of gratuity is due to the death of the employee or otherwise, the formula remains the same - i.e., the amount of gratuity depends on the length of service before the date of termination. Therefore, it follows that in scenario-1, the nominee would receive gratuity for 4 years by rounding off the principle, and in the latter case for 6 years if the period beyond the 6th year falls short of 6 months.
From India, Salem
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6185I think Mr. Rao has clearly explained the position with the extract of the relevant section of the Act. When the termination of employment leading to the payment of gratuity is due to the death of the employee or otherwise, the formula remains the same - i.e., the amount of gratuity depends on the length of service before the date of termination. Therefore, it follows that in scenario-1, the nominee would receive gratuity for 4 years by rounding off the principle, and in the latter case for 6 years if the period beyond the 6th year falls short of 6 months.
From India, Salem
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Mr. Umakanthan explained well why gratuity cannot be paid as a component of salary every month. It is a retiral benefit that offers economic security when a person is not employed, enabling them to earn some money regularly by gainfully investing the lump sum amount.
Secondly, if an amount is paid as a component of salary, even ostensibly as gratuity, it is likely to acquire the character of part of wages by the definition of wages in various Acts. This may pose a risk of it being counted for PF, ESI, and even for gratuity payment.
B. Saikumar HR & Labour Relations Adviser Navi Mumbai
From India, Mumbai
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Secondly, if an amount is paid as a component of salary, even ostensibly as gratuity, it is likely to acquire the character of part of wages by the definition of wages in various Acts. This may pose a risk of it being counted for PF, ESI, and even for gratuity payment.
B. Saikumar HR & Labour Relations Adviser Navi Mumbai
From India, Mumbai
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As very well explained by Mr. Umankanthan and Mr. Nathrao, it's incorrect to pay Gratuity in advance or in installments along with monthly salary. Moreover, the Gratuity amount due will be as per Basic pay as on the last working day of the employee; as such, it may not be feasible for anyone to preempt the due amount.
However, for reasons best known - as per the respective company policy, if an employee seeks and is paid in advance, with an agreed term (duly documented) that the unrefunded part of the advance may be settled against his future Gratuity dues, then only it can be legally correct to recover such outstanding dues/advances from future Gratuity dues. Written employee consent is a must, since it is a recovery from a statutory due (Gratuity can't be otherwise adjusted or attached with any other dues/advances, unless otherwise authorized by a court for special reasons as considered).
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However, for reasons best known - as per the respective company policy, if an employee seeks and is paid in advance, with an agreed term (duly documented) that the unrefunded part of the advance may be settled against his future Gratuity dues, then only it can be legally correct to recover such outstanding dues/advances from future Gratuity dues. Written employee consent is a must, since it is a recovery from a statutory due (Gratuity can't be otherwise adjusted or attached with any other dues/advances, unless otherwise authorized by a court for special reasons as considered).
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Dear Mr. Moorthy,
I beg to disagree with your comment. Gratuity is to be paid only on exit after meeting the requirements as specified in the Payment of Gratuity Act. It cannot be paid in monthly installments regardless of any individual agreement with the company. The law is very clear, and we should not try to find loopholes or circumvent the law.
Including a monthly amount in CTC is okay but cannot be paid until 5 years or over or death.
From India, Pune
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I beg to disagree with your comment. Gratuity is to be paid only on exit after meeting the requirements as specified in the Payment of Gratuity Act. It cannot be paid in monthly installments regardless of any individual agreement with the company. The law is very clear, and we should not try to find loopholes or circumvent the law.
Including a monthly amount in CTC is okay but cannot be paid until 5 years or over or death.
From India, Pune
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@Mr. Nathrao, thank you. What I stated was exactly the same. The due date for gratuity is clearly stipulated, and no doubt should arise in anyone's mind. It cannot be part of the salary nor payable in advance.
Part 2 of my statement above concerns the process for the recovery of outstanding advances, if any, to be adjusted against future Gratuity dues (as and when it's due), with the clear consent of the employee given in writing. This should not be confused with the due date for the payment of Gratuity.
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Part 2 of my statement above concerns the process for the recovery of outstanding advances, if any, to be adjusted against future Gratuity dues (as and when it's due), with the clear consent of the employee given in writing. This should not be confused with the due date for the payment of Gratuity.
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@Poonam, regarding the payable amount of Gratuity dues in the case of an employee's death, the actual service counts. Also, please check from which state the employee served.
Some of the states (e.g., AP/TS/Maharashtra) have issued GO for compulsory insurance towards the payment of Gratuity. The policies issued by LIC and a few other service providers include a provision for future service gratuity. As such, the Gratuity payable amount would be calculated not only for past service rendered but also for the future service up to 58 years, which is paid by the respective insurance provider through the employer-managed Gratuity Trust.
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Some of the states (e.g., AP/TS/Maharashtra) have issued GO for compulsory insurance towards the payment of Gratuity. The policies issued by LIC and a few other service providers include a provision for future service gratuity. As such, the Gratuity payable amount would be calculated not only for past service rendered but also for the future service up to 58 years, which is paid by the respective insurance provider through the employer-managed Gratuity Trust.
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Dear Msmoorthy ji & others,
I would like to draw your kind attention to the fact that, so far in Maharashtra, an amendment of 1987 Section 4A on compulsory insurance/setting up of a gratuity fund has not been brought into force. This provision has also not been implemented in other states to my knowledge. However, I recall reading somewhere about a notification by the AP Govt. regarding the implementation of this provision.
Nevertheless, Gratuity Insurance Policies are available from LIC of India and other insurance companies. By paying an extra premium in a Group Gratuity Policy for life coverage, one can ensure coverage for the employees' lives. In this scenario, gratuity is paid in case of death, considering the gratuity years up to the retirement age and the salary at the retirement age based on the inflation increase.
Thank you.
From India, Mumbai
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I would like to draw your kind attention to the fact that, so far in Maharashtra, an amendment of 1987 Section 4A on compulsory insurance/setting up of a gratuity fund has not been brought into force. This provision has also not been implemented in other states to my knowledge. However, I recall reading somewhere about a notification by the AP Govt. regarding the implementation of this provision.
Nevertheless, Gratuity Insurance Policies are available from LIC of India and other insurance companies. By paying an extra premium in a Group Gratuity Policy for life coverage, one can ensure coverage for the employees' lives. In this scenario, gratuity is paid in case of death, considering the gratuity years up to the retirement age and the salary at the retirement age based on the inflation increase.
Thank you.
From India, Mumbai
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Dear Koragoankar ji,
Please see the attached AP Govt notification for compulsory gratuity insurance. The same is applicable for Telangana as well. Regarding Maharashtra, please refer to section 4A in the attachment provided, which stipulates compulsory gratuity insurance.
Thank you.
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Please see the attached AP Govt notification for compulsory gratuity insurance. The same is applicable for Telangana as well. Regarding Maharashtra, please refer to section 4A in the attachment provided, which stipulates compulsory gratuity insurance.
Thank you.
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Dear Mr. Moorthy ji,
I also concur with Mr. Keshav Korgaonkar that the State of Maharashtra has not notified gratuity insurance rules in terms of Section 4A on the lines of AP & Telangana. The Section 4A will not be in force in a State unless the State Government concerned notifies it to be in force, as is evident from the commencing lines of Section 4A which state, "with effect from such date as may be notified by the appropriate government in this behalf..."
B. Saikumar
HR & Labour Relations Adviser
Navi Mumbai
From India, Mumbai
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I also concur with Mr. Keshav Korgaonkar that the State of Maharashtra has not notified gratuity insurance rules in terms of Section 4A on the lines of AP & Telangana. The Section 4A will not be in force in a State unless the State Government concerned notifies it to be in force, as is evident from the commencing lines of Section 4A which state, "with effect from such date as may be notified by the appropriate government in this behalf..."
B. Saikumar
HR & Labour Relations Adviser
Navi Mumbai
From India, Mumbai
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The Gratuity Act rules of Maharashtra state come into force only once they are passed by the State Cabinet, which is an elaboration of the Gratuity Act for the purpose of implementation across Maharashtra state.
Still if there is any doubt, the same should be referred to the Concerned Government authority who will be the competent person to clarify.
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Still if there is any doubt, the same should be referred to the Concerned Government authority who will be the competent person to clarify.
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc