Hello All, We are a small company with a span of 130 employees. Though we have mentioned everything about Gratuity in offer letter and Employment Agreement, we have not been deducting Gratuity from Employees since inception. Now, the Gratuity amount is coming to more than 1 crore, which should be paid to Employees. What do we do in this case please.
From India, Bengaluru
1From India, Bengaluru
Hi,
Under the Payment of Gratuity Act, 1972 Gratuity is a lump sum amount that employers pay their employees as a sign of gratitude for the services provided. Gratuity is statutory and Employer cannot recover it from the salaries of the employees. Upon resignation of the employee, if the employee had completed continuous service period of 5 years and above then it is the responsibility of the Employer to pay Gratuity upon the resignation of the employee. Employers have the option for opting group gratuity scheme facility through any insurance companies and can pay premium to the insurance companies. Group gratuity insurance helps an employer to meet their statutory liability towards gratuity. Upon resignation for eligible employees insurance companies will pay the Gratuity.
Having 130 employees you are claiming projected Gratuity amount as 1Crore ? which looks bit abnormal ?
How long your establishment is functioning and whether Basic+DA is very much on the higher side ?. Please check your calculation for Gratuity.
From India, Madras
Under the Payment of Gratuity Act, 1972 Gratuity is a lump sum amount that employers pay their employees as a sign of gratitude for the services provided. Gratuity is statutory and Employer cannot recover it from the salaries of the employees. Upon resignation of the employee, if the employee had completed continuous service period of 5 years and above then it is the responsibility of the Employer to pay Gratuity upon the resignation of the employee. Employers have the option for opting group gratuity scheme facility through any insurance companies and can pay premium to the insurance companies. Group gratuity insurance helps an employer to meet their statutory liability towards gratuity. Upon resignation for eligible employees insurance companies will pay the Gratuity.
Having 130 employees you are claiming projected Gratuity amount as 1Crore ? which looks bit abnormal ?
How long your establishment is functioning and whether Basic+DA is very much on the higher side ?. Please check your calculation for Gratuity.
From India, Madras
Thank you so much for the reply sir. The company is in the market since 2004. The calculation approximately comes to 1 crore.
From India, Bengaluru
From India, Bengaluru
Hi, Ok. Total 19 years as of 2023. I hope around 80% of your employees are working for very long years ?
From India, Madras
From India, Madras
Yes Sir, that is correct. And slowly tenured employees have started to resign and we are liable to pay them the Gratuity amount.
From India, Bengaluru
From India, Bengaluru
Hi,
Got it. You can suggest your Management about Group Gratuity Scheme (wherein also premium would be high to start with considering the service seniority of the employees). In case of more resignations it would become huge liability for your Organization.
From India, Madras
Got it. You can suggest your Management about Group Gratuity Scheme (wherein also premium would be high to start with considering the service seniority of the employees). In case of more resignations it would become huge liability for your Organization.
From India, Madras
will the group gratuity help in current situation? How can i save my company as an HR.
From India, Bengaluru
From India, Bengaluru
The very purpose of section 4A of the Payment of Gratuity Act which necessitates the establishments to invest gratuity fund in the form of LIC's policies is to make the establishment pay the gratuity without affecting the working capital. It is true that this section is not properly enforced because the liability to buy policies depends on the state government notification and many states are yet to notify the date on which this section will become enforceable. But the Accounting standards (I don't remember which standard) provide that there should be actuarial valuation done every year and an amount is earmarked for payment of gratuity based on the valuation. Therefore, the responsibility is not on the HR Manager but it is on the Finance Manager. The Chartered Accountants who audit your statements of accounts should have properly advised your management of this provision. Had they advised properly, this situation would not have arisen. There is no way to overcome the situation. As commented by Lakshmi Narayan, you cannot just ignore the law.
Taking a gratuity policy at this stage will be very costlier even though that is the only remedy. Or you should decide as and when the demand arises/ when the employees leave. you can release it from the working capital. Anyway, you can calculate the immediate fund requirements based on retirement age and profanities of employees leaving. But involve the finance team in it.
From India, Kannur
Taking a gratuity policy at this stage will be very costlier even though that is the only remedy. Or you should decide as and when the demand arises/ when the employees leave. you can release it from the working capital. Anyway, you can calculate the immediate fund requirements based on retirement age and profanities of employees leaving. But involve the finance team in it.
From India, Kannur
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc