I am doing voluntary work for a small humanitarian organization (9 employees in India). Unfortunately, we did not get FCRA anymore and therefore have to close our projects. We do not know how much gratuity the employees in India have the right to get. We would appreciate any information or recommendations. Thank you very much!
From Switzerland, Horgen
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From Switzerland, Horgen
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Dear Fridoya,
I believe the organization would have already been registered under the Foreign Contribution (Regulation) Act, 1976. At that time, it would have been specified regarding the constitution of the organization, such as whether it is a Trust registered under the Societies Registration Act or a Company incorporated under the Companies Act.
1) In any case, the provisions of the Payment of Gratuity Act, 1972 come into effect only when the number of employees in such an establishment reaches 10 or more, regardless of any subsequent reduction in the workforce.
2) Every employee in such an establishment to which the PG Act, 1972 applies would be entitled to claim gratuity under the Act only upon termination of employment due to retirement, resignation, discharge, dismissal, retrenchment, death, or disablement due to accident or disease, provided that they have served for not less than five years continuously in the establishment. However, termination of employment due to death or disablement does not necessitate the minimum service requirement.
3) Gratuity for such eligible employees should be calculated as follows:
Gratuity = Last drawn monthly wages [only the sum of basic and D.A] / 26 X 15 X the number of years of completed service
4) When calculating the total number of years of continuous service, any service exceeding 6 months should be considered as one year.
5) The amount of gratuity calculated under the Act should not exceed the ceiling of Rs. 20 lakh.
6) The gratuity amount payable under the Act must be disbursed to the employee or their nominees in case of the employee's death within 30 days of becoming payable; otherwise, simple interest at a rate of 10% per annum will be imposed for the period of delay.
7) In the event of any dispute regarding the amount of gratuity owed, the employer must deposit the calculated gratuity amount with the Controlling Authority as per their own assessment under the Act.
If you are winding up your projects and downsizing your workforce, please follow the above steps concerning eligible employees for gratuity if the PG Act, 1972 is applicable to your organization.
From India, Salem
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6185I believe the organization would have already been registered under the Foreign Contribution (Regulation) Act, 1976. At that time, it would have been specified regarding the constitution of the organization, such as whether it is a Trust registered under the Societies Registration Act or a Company incorporated under the Companies Act.
1) In any case, the provisions of the Payment of Gratuity Act, 1972 come into effect only when the number of employees in such an establishment reaches 10 or more, regardless of any subsequent reduction in the workforce.
2) Every employee in such an establishment to which the PG Act, 1972 applies would be entitled to claim gratuity under the Act only upon termination of employment due to retirement, resignation, discharge, dismissal, retrenchment, death, or disablement due to accident or disease, provided that they have served for not less than five years continuously in the establishment. However, termination of employment due to death or disablement does not necessitate the minimum service requirement.
3) Gratuity for such eligible employees should be calculated as follows:
Gratuity = Last drawn monthly wages [only the sum of basic and D.A] / 26 X 15 X the number of years of completed service
4) When calculating the total number of years of continuous service, any service exceeding 6 months should be considered as one year.
5) The amount of gratuity calculated under the Act should not exceed the ceiling of Rs. 20 lakh.
6) The gratuity amount payable under the Act must be disbursed to the employee or their nominees in case of the employee's death within 30 days of becoming payable; otherwise, simple interest at a rate of 10% per annum will be imposed for the period of delay.
7) In the event of any dispute regarding the amount of gratuity owed, the employer must deposit the calculated gratuity amount with the Controlling Authority as per their own assessment under the Act.
If you are winding up your projects and downsizing your workforce, please follow the above steps concerning eligible employees for gratuity if the PG Act, 1972 is applicable to your organization.
From India, Salem
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Dear Umakanthan53,
Thank you so much for your quick and friendly answer to my question - I do appreciate it very much! However, I do have to add an additional question. There are only 9 employees - therefore the Payment of Gratuity Act, 1972 does not come into play. What are the rules/laws in such a case? May I kindly ask you again?
Thank you very much and have a nice day!
Fridoya
From Switzerland, Horgen
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Thank you so much for your quick and friendly answer to my question - I do appreciate it very much! However, I do have to add an additional question. There are only 9 employees - therefore the Payment of Gratuity Act, 1972 does not come into play. What are the rules/laws in such a case? May I kindly ask you again?
Thank you very much and have a nice day!
Fridoya
From Switzerland, Horgen
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Dear Fridoya,
Even if the number of employees is only 9 as of now, had it been 10 or more some time in the past, you are bound to pay gratuity to these employees affected by the closure of the establishment. That apart, as per section 25-F of the Industrial Disputes Act, 1947, you have to pay them one month's notice or salary in lieu of notice AND pay them retrenchment compensation at 15 days average wages last drawn for every completed year of service rendered by them. If willing and financially capable, as a gesture of goodwill and in humanitarian consideration, the management can pay gratuity also despite the non-application of the PG Act, 1972 to the establishment.
From India, Salem
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Even if the number of employees is only 9 as of now, had it been 10 or more some time in the past, you are bound to pay gratuity to these employees affected by the closure of the establishment. That apart, as per section 25-F of the Industrial Disputes Act, 1947, you have to pay them one month's notice or salary in lieu of notice AND pay them retrenchment compensation at 15 days average wages last drawn for every completed year of service rendered by them. If willing and financially capable, as a gesture of goodwill and in humanitarian consideration, the management can pay gratuity also despite the non-application of the PG Act, 1972 to the establishment.
From India, Salem
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Dear Umakanthan Thank you very much for your kindness to reply so quickly to my answer. It is of great help, we apprecate it very much. I wish you all the best! Kind regards, Fridoya
From Switzerland, Horgen
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From Switzerland, Horgen
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Dear Fridoya,
No gratuity or claim for the same is out of the question "if one is doing voluntary work" as per your version. Besides, Mr. Umakanthnji has given complete details of who is eligible for gratuity and the conditions of payment of gratuity at the cessation of employment.
From India, Mumbai
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No gratuity or claim for the same is out of the question "if one is doing voluntary work" as per your version. Besides, Mr. Umakanthnji has given complete details of who is eligible for gratuity and the conditions of payment of gratuity at the cessation of employment.
From India, Mumbai
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Dear Umakanthan
May I again kindly ask you for your advice? In your last answer to my question you mentioned “retrenchment compensation”. I have done some research on the “Industrial Disputes Act” that – as I understand – sets the rules for these compensations. However, there are several things I do not understand about this act:
1. There are five part time teachers working for the organization – are teachers considered as “workmen” and therefore have a right to get retrenchment compensation?
2. What about a librarian?
3. Three employees work intermittently and not continuously and much less that 240 days in the previous 12 months – what are the rules in this case?
We certainly don’t want to be stingy. We always paid fair wages to our Indian employees with a yearly increase much more than the minimum. In addition, the employees received extra money for special expenses they could not afford. But fact is that our fundraising broke down drastically in the last two years because we were left in insecurity about FCRA. Insecurity is poison if you want to raise money and try to motivate people to donate for humanitarian projects. Nobody wants to give money to an organization that may not be able to transfer the money to the project he or she wants to support. So we are financially in a difficult situation. At least we could pay the wages so far. But now we have to close the projects because we did not get FCRA. Unfortunately we do not know why. It’s frustrating, upsetting, and sad, and our Indian employees will lose their jobs. We would love to pay them generous benefits, but we simply can’t. We can only pay compensation to those who are covered under the act. I therefore would very much appreciate your advice so that we could at least be fair according to the Indian law.
Thank you very much for your help! Kind regards,
Fridoya
From Switzerland, Horgen
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May I again kindly ask you for your advice? In your last answer to my question you mentioned “retrenchment compensation”. I have done some research on the “Industrial Disputes Act” that – as I understand – sets the rules for these compensations. However, there are several things I do not understand about this act:
1. There are five part time teachers working for the organization – are teachers considered as “workmen” and therefore have a right to get retrenchment compensation?
2. What about a librarian?
3. Three employees work intermittently and not continuously and much less that 240 days in the previous 12 months – what are the rules in this case?
We certainly don’t want to be stingy. We always paid fair wages to our Indian employees with a yearly increase much more than the minimum. In addition, the employees received extra money for special expenses they could not afford. But fact is that our fundraising broke down drastically in the last two years because we were left in insecurity about FCRA. Insecurity is poison if you want to raise money and try to motivate people to donate for humanitarian projects. Nobody wants to give money to an organization that may not be able to transfer the money to the project he or she wants to support. So we are financially in a difficult situation. At least we could pay the wages so far. But now we have to close the projects because we did not get FCRA. Unfortunately we do not know why. It’s frustrating, upsetting, and sad, and our Indian employees will lose their jobs. We would love to pay them generous benefits, but we simply can’t. We can only pay compensation to those who are covered under the act. I therefore would very much appreciate your advice so that we could at least be fair according to the Indian law.
Thank you very much for your help! Kind regards,
Fridoya
From Switzerland, Horgen
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Dear Friyoda,
A teacher is not a "workman" under the ID Act, 1947; hence, a teacher has no right to retrenchment compensation under the ID Act, 1947. A librarian of a library attached to any academic institution is considered a teacher.
To be eligible to claim retrenchment compensation, one should have been employed as a workman and should have rendered not less than one year of continuous service under the same employer. To be entitled to retrenchment compensation under the Act, one should have worked for not less than 240 days in every completed year of service, notwithstanding the interruptions mentioned as non-interruptions under section 25-B.
NOTE: Although a teacher is not a workman under the ID Act, 1947, he is considered an "employee" under section 2(e) of the PG Act, 1972.
Kind regards, [Your Name]
From India, Salem
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A teacher is not a "workman" under the ID Act, 1947; hence, a teacher has no right to retrenchment compensation under the ID Act, 1947. A librarian of a library attached to any academic institution is considered a teacher.
To be eligible to claim retrenchment compensation, one should have been employed as a workman and should have rendered not less than one year of continuous service under the same employer. To be entitled to retrenchment compensation under the Act, one should have worked for not less than 240 days in every completed year of service, notwithstanding the interruptions mentioned as non-interruptions under section 25-B.
NOTE: Although a teacher is not a workman under the ID Act, 1947, he is considered an "employee" under section 2(e) of the PG Act, 1972.
Kind regards, [Your Name]
From India, Salem
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc