New Delhi: Employers in India contribute various basic employee benefits such as allowances and reimbursements, paid time off, maternity leave, etc. Similarly, in cases of retirement, resignation, retrenchment, or disability due to any disease or accidental death, an employee or his/her nominees are liable for gratuity.
What is Gratuity?
Gratuity is another form of monetary incentive, that the employer provides to its employees. Reflecting on this, it is also important to note that an employee is only liable for gratuity if he or she has given service of at least 5 years to the firm.
How does gratuity work?
1. It’s mandatory for companies (with ten or more employees) under the Payment of Gratuity Act, 1972, to dispense this prerequisite to its employees.
2. As per the provision, an employee who is eligible to get a gratuity, needs to apply for it within 30 days.
3. The amount of gratuity should not exceed Rs 10 lakhs.
How to calculate gratuity?
The amount of gratuity payable is taken as 15 days for each completed year of service or more than six months.
The method to evaluate
Gratuity = N x B x 15/26,
N= Number of years of service in the firm
B= Last drawn basic salary + DA
There are also some other ways to evaluate the amount of gratuity, but in this article, we have provided the most common method used by companies across India.
If the employer refuses to pay gratuity!
1. First and foremost step that an employee can adopt, in case his/her employer refuses to settle their gratuity, is that an employee can write a letter to their employer. The employee must clearly state that they are entitled to gratuity as per the Payment of Gratuity Act, 1972.
2. Even after requesting, if the employer is not agreeing to release the gratuity amount, the employees have the right to file a complaint with the controlling authority under the Payment of Gratuity Act, 1972.
3. The employee can file a complaint within 90 days from when the gratuity became payable.
4. Complaints can be registered online using http://pgportal.gov.in, along with an application in Form I. In addition, the employee is needed to submit supporting documents like proof of employment, proof of the gratuity amounts due along with proof of the employer’s refusal to pay.
5. If the company fails to pay the gratuity amount to its employee within 30 days of passing the order, the Assistant Labor Commissioner appointed in the Labor Commissioner’s Office of the district, will then initiate legal action against the company within 15 days.
5. In a situation where even the controlling authority fails to provide justice, the last resort left in that case is the Labour Court. The employee can approach the court, a judicial body presented to deal with disputes in employer and employee relationships.
The court will hear both the parties.
(Written By- Mahek Nigam)
