I am looking for expert advice from all members regarding the undermentioned gratuity issue :-
Company is shutting down its operations and all employees are asked to leave the company. Please advice that if employee has completed 4 years 6 months 10 days will he/ she be eligible for gratuity.
Gratuity rules are clear but nowhere is it written as when company is closed what will be the liability of gratuity for company.
And if 4 years 240 days still required to make company liable to pay gratuity then all small unethical companies can stop operations after ever 4.5 year to save the gratuity. Please advice and if you have any supporting documents please share the same.
From India, Gurgaon
94Company is shutting down its operations and all employees are asked to leave the company. Please advice that if employee has completed 4 years 6 months 10 days will he/ she be eligible for gratuity.
Gratuity rules are clear but nowhere is it written as when company is closed what will be the liability of gratuity for company.
And if 4 years 240 days still required to make company liable to pay gratuity then all small unethical companies can stop operations after ever 4.5 year to save the gratuity. Please advice and if you have any supporting documents please share the same.
From India, Gurgaon
It is sad that the company is closing down with so many employees rendered jobless.
However, to the query that you have raised please check the Section 4A of the Act -
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.
If your company has complied with the above, the employees can knock on the doors of the insurance and get your Gratuity in the event of the closure as informed.
From India, Hyderabad
However, to the query that you have raised please check the Section 4A of the Act -
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.
If your company has complied with the above, the employees can knock on the doors of the insurance and get your Gratuity in the event of the closure as informed.
From India, Hyderabad
Please check whether appropriate Govt has notified the scheme for compulsory insurance through LIC of India.
Company is legally bound to clear all statutory dues while winding up.Gratuity is one such statutory due to be cleared.
Notice of Opening, change, closing of Establishment(Rule 3 of Payment of Gratuity rules 1972)
Once the Payment of Gratuity Act becomes applicable to the establishment, a notice in Form ‘A’ has to be given by the employer to the controlling authority within 30 days. Notice in Form ‘B’ is to be given to the controlling authority within 30 days of any change in name, address, employer or nature of business. Where an employer proposes to close down/wind up the business he has to give a notice in Form ‘C’ to the Concerned Controlling Authority minimum 60 days before the intended closure.
Employees having lesser than 5 years continuous service may not be eligible for gratuity anyway.
From India, Pune
Company is legally bound to clear all statutory dues while winding up.Gratuity is one such statutory due to be cleared.
Notice of Opening, change, closing of Establishment(Rule 3 of Payment of Gratuity rules 1972)
Once the Payment of Gratuity Act becomes applicable to the establishment, a notice in Form ‘A’ has to be given by the employer to the controlling authority within 30 days. Notice in Form ‘B’ is to be given to the controlling authority within 30 days of any change in name, address, employer or nature of business. Where an employer proposes to close down/wind up the business he has to give a notice in Form ‘C’ to the Concerned Controlling Authority minimum 60 days before the intended closure.
Employees having lesser than 5 years continuous service may not be eligible for gratuity anyway.
From India, Pune
Dear friend
The no of days for counting a year as per the Gratuity act is 240. Hence if you are completing 240 days in 365 days in a year u r eligible for one year. According to this a person is eligible for gratuity by complection 240 days x 5 years. Hence if a person complected 4 years and 240 days in the 5 th year is eligible for gratuity.
I am attached the High court Judgement as reference
Input received from Mr. Alphonse
From India, Mumbai
The no of days for counting a year as per the Gratuity act is 240. Hence if you are completing 240 days in 365 days in a year u r eligible for one year. According to this a person is eligible for gratuity by complection 240 days x 5 years. Hence if a person complected 4 years and 240 days in the 5 th year is eligible for gratuity.
I am attached the High court Judgement as reference
Input received from Mr. Alphonse
From India, Mumbai
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