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What to do if employer refuses to pay gratuity?
Team SoOLEGAL 28 Nov 2023

What to do if employer refuses to pay gratuity?

Introduction:

Gratuity, a token of appreciation from employers to employees for dedicated service, is a crucial aspect of employment benefits. Governed by the Payment of Gratuity Act, 1972, this mandatory benefit is designed to acknowledge and reward employees who have contributed significantly to an organization. However, instances of employers refusing gratuity payment can lead to considerable challenges for employees.

 

Understanding the Regulations:

The Payment of Gratuity Act, 1972, stipulates that an employee completing five years of continuous service becomes eligible for gratuity. The computation involves 15 days of wages for each completed year of service, with a maximum limit of Rs 20 lakh. To address non-payment, employees must navigate these regulations effectively.

 

Amicable Resolution Attempts:

When faced with an employer refusing gratuity obligations, employees are advised to take a diplomatic approach. Drafting a letter to the employer, emphasizing entitlements under the Payment of Gratuity Act, 1972, and requesting prompt payment is the initial step. Seeking assistance from the human resources or accounts department can facilitate an amicable resolution.

 

Lodging a Complaint with the Controlling Authority:

If amicable efforts prove unsuccessful, filing a complaint with the controlling authority specified in the Payment of Gratuity Act, 1972 becomes necessary. This government-appointed authority addresses gratuity-related grievances. Employees can submit an online complaint through http://pgportal.gov.in within 90 days of the gratuity becoming due, accompanied by Form I and supporting documents.

 

Recourse to the Labor Court:

If the controlling authority's intervention fails, employees can escalate the matter to the labor court. As a judicial body overseeing employer-employee disputes, the labor court requires the filing of a formal complaint. Active participation in subsequent hearings is essential for pursuing a resolution. 

Essential for availing of gratuity

1. Gratuity Availability in Both Sectors:

  - Yes, in India, every employer in the public and private sectors is mandated to pay gratuity if the employee has completed five continuous years of work.

 

2. Law Protecting the Right to Gratuity:

   - The Payment of Gratuity Act, 1972 ensures the statutory right to gratuity. It is applicable to various establishments with at least ten employees.

 

3. Death Before Completion of 5 Years:

   - In the case of an employee's death, gratuity is still payable. The nominee or legal heirs will receive the gratuity, and the 5-year service requirement is waived.

 

4. Timeline for Gratuity Payment:

   - Employers have 30 days post-resignation, retirement, or termination to pay gratuity. Employees can apply within this period, and interest accrues after 30 days.

 

5. Non-Payment Reporting:

   - Section 3 of the Payment of Gratuity Act designates a controlling authority to arbitrate disputes. Both parties receive a notice, and non-compliance can lead to prosecution.

 

6. Punishment for Employer Refusal:

   - Section 9 allows penalties, including imprisonment for up to 6 months (extendable to 2 years) for employers refusing to pay gratuity. False statements may result in a similar penalty.

 

7. Gratuity Insurance:

   - Section 4(A) mandates organizations to secure gratuity insurance, ensuring sufficient funds for gratuity payment. The central government's notifications govern the applicability of this provision.

 

8. Payment of Gratuity After Death:

   - Legal heirs can receive gratuity after an employee's death. Exemptions and taxation rules, as per the Income Tax Act, apply.

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Conclusion:

Understanding and asserting rights related to gratuity is essential for employees. The Payment of Gratuity Act, 1972, serves as a safeguard, and employees should be proactive in navigating its provisions to ensure timely and rightful gratuity payments. In cases of non-compliance, the legal avenues provided by the act offer recourse for employees seeking resolution and justice.

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