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Another 10 FAQ on Gratuity Act in India


One of my most popular blog post from my old blogs archive is 13 facts one should know about Gratuity!! Thanks to all my HR friends to read and share their feedback and queries about gratuity. In fact, it was so popular that it has exceeded the limit to take more comments on this blog post.

Hence I have requested to all my friends to post their further queries on our HR Forum i.e. HR SUCCESS TALK Forum so that their queries can be answered by members.

There are few more interesting queries which were asked by HR professionals hence in this post of mine, I would like to put them in summaries form for other readers.

FAQ 14: What is the procedure to be followed in case an employer is not paying gratuity to the employee or terminating employee services intentionally for purpose of non-payment of gratuity.

I would suggest, that employee in such cases should send a letter to the employer through registered post mentioning about his employment with the organization and asking for gratuity amount. In case, there is no reply from the employee then another letter through registered post should be sent when the employee should given reference of first letter and ask for reply. Employee should also mention that in case employer do not reply then in that case employee is left with only one option- approaching labour court.

Employee should keep copy of correspondence with employer. I am sure that in many cases, you will receive reply or your gratuity amount from employer. But, in case there is no action taken by employer then you should approach competent authority of their region to file a case.

FAQ 15: Gratuity is part of my CTC. I have left company before completing 5 years. Can I claim my gratuity as it was mentioned in my CTC.

Gratuity is payable only when an employee completes 5 years of continuous service. If an employee leaves company before 5 years then employee is not eligible for gratuity irrespective whether same was part of employee CTC or not.

FAQ 16: I have resigned on 1st Jan 13 and will leave by 30th Jan 13. I will complete 5 years by 20th Jan 13. Will I be eligible for gratuity as I am under notice period? Is it related to my resignation anyways?

To calculate number of years employment, employee’s date of joining and date of leaving is considered and it has nothing to do with date of resignation. In above case, employee will be eligible for gratuity as employee will leave after completing 5 years.

FAQ 17: One of my friend was working with XYZ company on probation period for 1 year and after completion of probation period he got confirmation letter from Management. His total tenure of service was 5 years 3 months (Including Probation Tenure). In view of above scenario, I would like to know about whether he is eligible for Gratuity? Should we consider Probation period/ training period etc. for completion of 5 years of service while computing Gratuity Payment to the concerned employee?

Probation period is considered while calculating eligibility for gratuity.

FAQ 18: Can an employee claim gratuity after completion of 5 years without leaving the organization?

Gratuity can only be claimed once an employee leaves the organization and not in between.

FAQ 19: After an employee leaves organization, in how many days a company should pay his gratuity amount?

Max within 30 days.

FAQ 20: If an employee left us after 5 years without claiming gratuity as part of exit ( I read in gratuity act that he has to make a written request), completed all exit formalities and left. Can he come back and claim gratuity after 3 or 4 years. Is there a time period when he should make the request. What is the liability of the company in such cases?

Gratuity payment is employer liability hence employer need to ensure make payment along with Full and final of employee irrespective whether employee claims it or not. Employee can claim Gratuity any time after exit. This has been the result from many high courts’ verdict on the issue.

FAQ 21: A person worked for ABC company in India. He was sponsored by xyz company in USA on H1 (local work visa) and went to USA for 6 months and was paid by XYZ company in USA. No payroll was run for him in India during that time and hence has a break in payroll in India. Employee returned back to India due to personal reasons and joined back in ABC company. ABC and XYZ companies have two directors in common. So do we need to consider this as continuous employment and pay him gratuity? He signed different agreements with ABC and XYZ companies as per local laws.

Only because the directors of both company is same does not establish relationship with respect to continuous employment especially when employee had different agreement with ABC and XYZ company. Hence as per my opinion, it should not be considered as continuous employment hence gratuity is not applicable. In case company ABC has given transfer letter to you to work in XYZ company then you can claim gratuity.

FAQ 22: I worked in company ABC for 3 years and then company name changed to XYZ where I have continued and worked for 4 years. We did not have to resign from company ABC and nor did we have to join in company XYZ. There was no new joining letter, no new terms and conditions. Company management also remained same. Salary account created by the company ABC also remained the same.Now after my resignation, the company has not paid my gratuity even after one month. For claiming gratuity in form ‘I’, shall I write the employer name as Company ‘XYZ’ or ‘ABC’ or ‘XYZ (earlier ABC)’.

Company has to pay you your gratuity amount as you are very well eligible for gratuity. Your total tenure is 7 years. You can write to company through registered with AD asking to pay your gratuity amount. In case company do not revert to your letter then you can approach labour office and file your claim.

FAQ 23 : I have worked with a company called “X Pvt Ltd” registered in India for 7yrs and now I’m moving to our USA office ( the same company registered as “X Inc” in USA). I’ll be a permanent employee in USA from now and on US payroll. I’m no longer an employee of company X registered in India. Am I eligible for gratuity now?

Yes, As you have complete more than 5 years in India, you can claim your gratuity now.

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