I have been working in a MNC since Feb 2008 in this company and had retired on 2.12.2022. My company extended my services and the letter says that that "your service contract is extended till 2nd Dec'2024 and all other terms and condition of your services shall continue to govern".
As per the Gratuity rule that 50% of the employees CTC is basic pay and the remaining 50% comprises employees allowance, all employees basic was revised since Apr'2023. But now HR is saying that "Gratuity – till 58 your actual retirement age , it is accumulated in trust / LIC and shall be paid what is accumulated and your last basic year (2024) till your actual superannuated year".
Kindly advise whether I should get the gratuity on basic of 2022 or 2024. Can you pls let me have your legal advise.
With regards
From India, Pune
As per the Gratuity rule that 50% of the employees CTC is basic pay and the remaining 50% comprises employees allowance, all employees basic was revised since Apr'2023. But now HR is saying that "Gratuity – till 58 your actual retirement age , it is accumulated in trust / LIC and shall be paid what is accumulated and your last basic year (2024) till your actual superannuated year".
Kindly advise whether I should get the gratuity on basic of 2022 or 2024. Can you pls let me have your legal advise.
With regards
From India, Pune
You are entitled to get gratuity based on the salary that you draw at the time of your actual relieving, ie, if you remain till December 2024, the gratuity should be computed according to salary of December 2024 and not according to salary of your superannuation date, ie, December 2022. If the gratuity is maintained in trust, the LIC may pay gratuity based on 2022, but the difference amount should be paid by the company.
There is no rule under Payment of Gratuity Act that gratuity should be computed on 50% of CTC. Under the Act wages means total emolument, and only exclusion is for house rent allowance, overtime wages, commission etc. Of these HRA is excluded from the scope of wages only if it is paid as compensatory allowances, and that also to those employees who reside in leased accomodation and is not available to those who reside in their own houses or when the spouse is in receipt of HRA. Please follow the link for further reading.
http://madhu-t-k.blogspot.com/2024/04/gratuity-qualifying-salary-some.html
The above article is all about computation of gratuity, and are my observations only.
From India, Kannur
4246There is no rule under Payment of Gratuity Act that gratuity should be computed on 50% of CTC. Under the Act wages means total emolument, and only exclusion is for house rent allowance, overtime wages, commission etc. Of these HRA is excluded from the scope of wages only if it is paid as compensatory allowances, and that also to those employees who reside in leased accomodation and is not available to those who reside in their own houses or when the spouse is in receipt of HRA. Please follow the link for further reading.
http://madhu-t-k.blogspot.com/2024/04/gratuity-qualifying-salary-some.html
The above article is all about computation of gratuity, and are my observations only.
From India, Kannur
It is a technical fault. Your gratuity is controlled by LIC / Trust. Probably in your Trust deed it is mentioned to pay contribution up to normal retirement age i.e. 58. Had it been that you have retired at the age of 58 and settled all your dues and then separately extension of 2 years, then you are not eligible for gratuity till 2024 as the extension job is only 2 years.
In this case the organization by a technical mistake extended your service further 2 years without any break and probably without cross checking the Trust rule which has caused your demand for gratuity up to 2024 instead 2022.
You appeal to controlling authority under the PG Act for your claim.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs.in
From India, New Delhi
In this case the organization by a technical mistake extended your service further 2 years without any break and probably without cross checking the Trust rule which has caused your demand for gratuity up to 2024 instead 2022.
You appeal to controlling authority under the PG Act for your claim.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs.in
From India, New Delhi
As per the communication from your company "your service contract is extended till 2nd Dec'2024 and all other terms and condition of your services shall continue to govern".
Based on this, in December 24 you should be entitled to payment of gratuity for 17 years (16 years 9 months rounded off to 17 years). Your last basic salary (Dec 24) should be considered for calculation of your gratuity.
From India, Kolkata
Based on this, in December 24 you should be entitled to payment of gratuity for 17 years (16 years 9 months rounded off to 17 years). Your last basic salary (Dec 24) should be considered for calculation of your gratuity.
From India, Kolkata
Yes, the service till December 2024 will be considered for gratuity. But I differ the computation of gratuity. Nowhere in the Payment of Gratuity Act it is said that gratuity should be calculated on the basic salary, and nowhere in the Act basic wage is defined but wages is defined as total emoluments and not just basic pay that the employer fixes.
From India, Kannur
From India, Kannur
I discussed the same with my HR but same reply. I am appending below the reply recd :
Your actual legal age of retirement is 58 years and you have already completed the same and therefore at the time of your separation you will get the Gratuity from LIC up to the age of 58 years because our Gratuity is with LIC and being a Government body they also follow the Gratuity rules. Post that you will also get an additional Gratuity amount as mentioned in the letter for the year 2023-24 and 2024 as well (for the year 2024, you will get it on pro-rata basis and this amount will be paid by the Company).
Kindly advise.
With regards.
From India, Pune
Your actual legal age of retirement is 58 years and you have already completed the same and therefore at the time of your separation you will get the Gratuity from LIC up to the age of 58 years because our Gratuity is with LIC and being a Government body they also follow the Gratuity rules. Post that you will also get an additional Gratuity amount as mentioned in the letter for the year 2023-24 and 2024 as well (for the year 2024, you will get it on pro-rata basis and this amount will be paid by the Company).
Kindly advise.
With regards.
From India, Pune
Having gone through the responses to your thread, I wish to state that, it will depend on the condition mentioned in your letter of appointment relating to Gratuity.
Unless we read this condition, it would be inappropriate for me to comment on this.
Some Companies enter into an agreement with LIC and based on an actuarial valuation, the Company pays the amount demanded by LIC every year. The Gratuity pay out will be dependant on the age of superannuation (58 years).
However, if the Company pays a risk premium, LIC pays Gratuity to a deceased employee's kin, a sum considering service till his/ her age of superannuation (58 years), even if he/ she dies several years before superannuation.
Some organisations do noat have an agreement with LIC and they generally pay Gratuity to their employees based on the actual date of retirement beyond superannuation if applicable.
Regards
MVK
From India, Madras
Unless we read this condition, it would be inappropriate for me to comment on this.
Some Companies enter into an agreement with LIC and based on an actuarial valuation, the Company pays the amount demanded by LIC every year. The Gratuity pay out will be dependant on the age of superannuation (58 years).
However, if the Company pays a risk premium, LIC pays Gratuity to a deceased employee's kin, a sum considering service till his/ her age of superannuation (58 years), even if he/ she dies several years before superannuation.
Some organisations do noat have an agreement with LIC and they generally pay Gratuity to their employees based on the actual date of retirement beyond superannuation if applicable.
Regards
MVK
From India, Madras
The HR is wrong in interpreting the Gratuity Act. It is okay that LIC will pay the amount calculated on the basis of the superannuation date (not the retirement date) which is mentioned in the Policy. Since the date of superannuation as per the Policy you have purchased is 58, the liability of LIC will come to an end by issuing cheque for the amount computed on the basis of a service till the age of superannuation, ie, 58. But since the service of employee has been extended till Dec 2024. the employer is bound to pay gratuity only when the actual retirement takes place, ie, December 2024. Otherwise, the employer should have settled the gratuity amount at 58 years and then issued a fresh appointment order for the period post to it. There should not be any words to mean that the service conditions will remain unchanged. At least in the letter, there should be something that makes the service interruptive. Another important point is that arrangement with LIC is to make funds available, and it is an arrangement between the company/ employer and a third party, LIC,and for the employees, it has no relevance. What is relevant for the employee is getting gratuity when he actually retires.
From India, Kannur
From India, Kannur
Relevant provisions of the Act is reproduced here for proper understanding -
THE PAYMENT OF GRATUITY ACT, 1972
2. Definitions.—In this Act, unless the context otherwise requires,—
xxxxx
(s) “wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
4. Payment of gratuity.—(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
7[4A. Compulsory insurance.—(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:
xxxxx
(2) 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:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: xxxx
Unquote:
Here two questions are raised - 1) Wages (salary) for computation of gratuity and 2) the length of service for determination.
So far as the Salary is concerned there is no clarification whether the salary for the extended period will be continued on the same scale at the time of extension ie., 58 yrs OR to be refixed for 59th & 60th year.
Secondly, it may be appropriate to compute the gratuity reckoning the extended period i.e.,60 as 'continuous service' without break.
The question of who pays the addl. funds, it is presumed, partly answered by the employer (which is over and above what is to be paid by LIC)
From India, Bangalore
THE PAYMENT OF GRATUITY ACT, 1972
2. Definitions.—In this Act, unless the context otherwise requires,—
xxxxx
(s) “wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
4. Payment of gratuity.—(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
7[4A. Compulsory insurance.—(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer:
xxxxx
(2) 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:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: xxxx
Unquote:
Here two questions are raised - 1) Wages (salary) for computation of gratuity and 2) the length of service for determination.
So far as the Salary is concerned there is no clarification whether the salary for the extended period will be continued on the same scale at the time of extension ie., 58 yrs OR to be refixed for 59th & 60th year.
Secondly, it may be appropriate to compute the gratuity reckoning the extended period i.e.,60 as 'continuous service' without break.
The question of who pays the addl. funds, it is presumed, partly answered by the employer (which is over and above what is to be paid by LIC)
From India, Bangalore
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Order No. 1-2018 Extension of date for submitting the statement in FORM GST TRAN-2.pdf
How to Use an Extension Ladder Safely.zip