Dear Friends,
Please provide me citation & Calculation for the following issue:
There was an employee worked for salary for Eleven years. He was further appointed as Whole time Director[WTD] for 6 years. This was duly informed to ROC and the same is recorded with ROC. Since he was made as Director he was being paid Director's consolidated remuneration (hence no Basic or DA) as per Board resolutions and every year depending upon the profit he was given increase in his fee also. The Board resolutios clearly spell out that he was being paid Directors remuneration.
After his resignation he is claiming gartuity from the Company.
Please clarify :
1.How to calculate his gratuity when their is no basic & DA as he was paid consolidated remuneration.
2.Should we calculate gratuity on whole consolidated amount.
3.If I refer the below statement :
where the WTD has completes his tenure of 5 years and is paid gratuity for the period. He is reappointed for another 5 years, but resigns before completion of tenure of another 5 years after reappointment. In such case he will loose gratuity for his second term.
If the above is true then we have not paid any gratuity. Then how it should be calculated now.
Please Reply as soon as possible
Thanks,
Ritika
From India, Pune
3Please provide me citation & Calculation for the following issue:
There was an employee worked for salary for Eleven years. He was further appointed as Whole time Director[WTD] for 6 years. This was duly informed to ROC and the same is recorded with ROC. Since he was made as Director he was being paid Director's consolidated remuneration (hence no Basic or DA) as per Board resolutions and every year depending upon the profit he was given increase in his fee also. The Board resolutios clearly spell out that he was being paid Directors remuneration.
After his resignation he is claiming gartuity from the Company.
Please clarify :
1.How to calculate his gratuity when their is no basic & DA as he was paid consolidated remuneration.
2.Should we calculate gratuity on whole consolidated amount.
3.If I refer the below statement :
where the WTD has completes his tenure of 5 years and is paid gratuity for the period. He is reappointed for another 5 years, but resigns before completion of tenure of another 5 years after reappointment. In such case he will loose gratuity for his second term.
If the above is true then we have not paid any gratuity. Then how it should be calculated now.
Please Reply as soon as possible
Thanks,
Ritika
From India, Pune
as per THE PAYMENT OF GRATUITY ACT, 1972 Section 2(e) Director is also an employee. Director's whole remuneration can be considered as Basic.
as per THE PAYMENT OF GRATUITY (AMENDMENT) BILL, 2010 maximum Gratuity Payable is Rs. 10,00,000.00/- (Rupees Ten Lakh).
Director's salary is inevitable higher than the ceiling limit. as per my understanding from your above post your director has served as Managerial Employee for 11 Years and FTD for 6 years (First Term) so, calculation is as below,
Considering consolidated salary of Rs. 1,00,00,000.00
=Salary(Basic+DA) X 15/26 X Number of completed years of service
=1,00,00,000.00 X 15/26 X 17 Years
= 9,80,76,923.08 =10,00,000.00/- (Ten Lakhs)
so even if calculated amount is Rs. 9,80,76,923.08 you are bound to pay only Rs.10,00,000.00/- .
From India, Mumbai
as per THE PAYMENT OF GRATUITY (AMENDMENT) BILL, 2010 maximum Gratuity Payable is Rs. 10,00,000.00/- (Rupees Ten Lakh).
Director's salary is inevitable higher than the ceiling limit. as per my understanding from your above post your director has served as Managerial Employee for 11 Years and FTD for 6 years (First Term) so, calculation is as below,
Considering consolidated salary of Rs. 1,00,00,000.00
=Salary(Basic+DA) X 15/26 X Number of completed years of service
=1,00,00,000.00 X 15/26 X 17 Years
= 9,80,76,923.08 =10,00,000.00/- (Ten Lakhs)
so even if calculated amount is Rs. 9,80,76,923.08 you are bound to pay only Rs.10,00,000.00/- .
From India, Mumbai
Thanks Suhas but what about where the WTD has completes his tenure of 5 years and is paid gratuity for the period. He is reappointed for another 5 years, but resigns before completion of tenure of another 5 years after reappointment. In such case he will loose gratuity for his second term.
Ritika
From India, Pune
Ritika
From India, Pune
Yes he will loose gratuity for his second term. because his employment ceases in first term. and new employment starts in second term. so if there is no continuous service of 5 years in second term then there is no gratuity payable for his service in second term.
From India, Mumbai
From India, Mumbai
Dear Ritika,
So far as any payment to the WTD it should be regulated as per the Articles of the Association, Board Resolution/AGM Resolution and the provisions of the Companies Act, 1956. First of all you should refer to the Terms & conditions of appointment and look for what it says about his gratuity. As per the Companies Act, Director's remuneration includes the component 'gratuity'. And if the gratuity is administered by your own Gratuity Rules then things should be clear to you. Otherwise you have to go by the prov.of the Companies Act, extract of relevant clauses are given below:
Section 198 in The Companies Act, 1956
198. 1 Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits.
(1) The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its managing agent, secretaries and treasurers or manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in sections 349, 350 and 351, except that the remuneration of the directors shall not be deducted from the gross profits: Provided that nothing in this section shall affect the operation of sections 352 to 354 and 356 to 360.
(2) The percentage aforesaid shall be exclusive of any fees pay- able to directors under sub- section (2) of section 309.
(3) Within the limits of the maximum remuneration specified in sub- section (1), a company may pay a monthly remuneration to its managing or whole- time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387.
(4) 2 Notwithstanding anything contained in sub- sections (1) to (3), but subject to the provisions of section 269, read with Schedule XIII, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole- time director or manager, by way of remuneration any sum[ exclusive of any fees payable to directors under sub- section (2) of section 309], except with the previous approval of the Central Government.]
1. Subs by Act 65 of 1960, s. 56, for s. 198.
2. Subs. by Act 31 of 1988, s. 25 (w. e. f. 15- 6- 1988 ).
Explanation.- For the purposes of this section and sections 309, 310, 311, 348, 352, 381 and 387," remuneration" shall include,-
(a) any expenditure incurred by the company in providing any rent- free accommodation, or any other benefit or amenity in respect of accommodation free of charge, to any of the persons specified in sub- section (1);
(b) any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid;
(c) any expenditure incurred by the company in respect of any obligation or service which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid; and
(d) any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.]
---------------
If you go thru' further there are maximum limits on remuneration linked to profits and other factors (@ 1% and 10% so on). Please refer Sec.Sections 197A, 198,268, 269, 309, 310, 311 read with Schedule XIII of the Companies Act, 1956 contain provisions relating to the appointment and remuneration of a Managerial Personnel.
So far as calculation is concerned, general calculation as per Gratuity act could be followed saying 15 days salary for every year of service and for the maximum limit it should be guided by the relevant AOA, Board resolution etc. If you are in HR, I think your Co.Secretary should guide you properly taking all factors into consideration. But still, You will have problem as to how the past service should be reckoned whether to treat this as 'continuous service' or otherwise. This also a matter to be dealt by your Board.
From India, Bangalore
So far as any payment to the WTD it should be regulated as per the Articles of the Association, Board Resolution/AGM Resolution and the provisions of the Companies Act, 1956. First of all you should refer to the Terms & conditions of appointment and look for what it says about his gratuity. As per the Companies Act, Director's remuneration includes the component 'gratuity'. And if the gratuity is administered by your own Gratuity Rules then things should be clear to you. Otherwise you have to go by the prov.of the Companies Act, extract of relevant clauses are given below:
Section 198 in The Companies Act, 1956
198. 1 Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits.
(1) The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its managing agent, secretaries and treasurers or manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in sections 349, 350 and 351, except that the remuneration of the directors shall not be deducted from the gross profits: Provided that nothing in this section shall affect the operation of sections 352 to 354 and 356 to 360.
(2) The percentage aforesaid shall be exclusive of any fees pay- able to directors under sub- section (2) of section 309.
(3) Within the limits of the maximum remuneration specified in sub- section (1), a company may pay a monthly remuneration to its managing or whole- time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387.
(4) 2 Notwithstanding anything contained in sub- sections (1) to (3), but subject to the provisions of section 269, read with Schedule XIII, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole- time director or manager, by way of remuneration any sum[ exclusive of any fees payable to directors under sub- section (2) of section 309], except with the previous approval of the Central Government.]
1. Subs by Act 65 of 1960, s. 56, for s. 198.
2. Subs. by Act 31 of 1988, s. 25 (w. e. f. 15- 6- 1988 ).
Explanation.- For the purposes of this section and sections 309, 310, 311, 348, 352, 381 and 387," remuneration" shall include,-
(a) any expenditure incurred by the company in providing any rent- free accommodation, or any other benefit or amenity in respect of accommodation free of charge, to any of the persons specified in sub- section (1);
(b) any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid;
(c) any expenditure incurred by the company in respect of any obligation or service which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid; and
(d) any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.]
---------------
If you go thru' further there are maximum limits on remuneration linked to profits and other factors (@ 1% and 10% so on). Please refer Sec.Sections 197A, 198,268, 269, 309, 310, 311 read with Schedule XIII of the Companies Act, 1956 contain provisions relating to the appointment and remuneration of a Managerial Personnel.
So far as calculation is concerned, general calculation as per Gratuity act could be followed saying 15 days salary for every year of service and for the maximum limit it should be guided by the relevant AOA, Board resolution etc. If you are in HR, I think your Co.Secretary should guide you properly taking all factors into consideration. But still, You will have problem as to how the past service should be reckoned whether to treat this as 'continuous service' or otherwise. This also a matter to be dealt by your Board.
From India, Bangalore
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