5 FAQs About Gratuity With Apt Answers

Of the many company benefits that working professionals are given as they work with an organization, a widely known one is Gratuity. As a part of The Payment of Gratuity Act, 1972, employers are liable to pay their parting employees a due amount if they have completed 5 years of service. This monetary reward is given to acknowledge the long-term work commitment and extraordinary efforts of the employees in achieving business goals.

To easily release the amount as the time of relieving an employee, a gratuity calculator is used which runs by the formula:

Gratuity = 15/26 * (n) * (b)

Wherein,

15 = Wages for 15 days

26 = Average no. of days in a month

n = No. of years of service completed

b = Last drawn basic salary of the employee

Let’s throw some light on the 7 biggest questions that a layman could ask revolving around the topic of gratuity and its terms & conditions:

1.  If an employer is not paying gratuity amount to an employee or terminating employee services for non-payment of gratuity, what is the appropriate procedure to deal with the same?

Firstly,the employee should send a letter to the employer through a registered post requesting the same. If the employee doesn’t hear back from the employer, he/she can send a second mail and give reference to the first letter while asking for a prompt reply, mentioning the consequences. The employee must keep a copy of correspondence with the employer. If there is still no response from the employer’s end, the last option is to approach labour court or any competent authority to file a case.

2.  If an employee has left the organization before completing 5 years of service, can he/she take the gratuity amount if it is mentioned in the CTC?

An employee is only eligible to enjoy gratuity benefits if he/she has completed a total of 5 years of uninterrupted service with a single organization. So, in this case, the employer doesn’t owe the gratuity amount to the employees since they haven’t completed 5 years, whetheror not it is mentioned in the CTC.

3.  If the date of joining is 1st January 2011 and the date of relieving after completing the notice period is 2nd January 2016 (over 5 years), but the date of resignation is 20th August 2016 (less than 5 years). Is the employee eligible for getting the gratuity amount?

While calculating the span for deciding gratuity applicability, the joining date and the relieving date are taken into account. So, here, the employee is eligible for getting the gratuity amount since he/she is serving the notice period (which is inclusive of the tenure) and by the time of relieving, he/she will have cleared the eligibility criteria, i.e. completed 5 years. 

4.  Can an employee claim the gratuity amount without leaving the organization if he/she has completed a span of 5 years?

No. An employee can only claim the gratuity amount once he/she has given written notice of resignation and has left the organization completely without any pending deliverables, completing the exit formalities, and after clearing all the dues.

5.  How much time does it take for an employee to receive the gratuity amount (time taken to deposit amount) after he/she has left the organization?

It takes approximately 30 days, i.e., a month’s time to complete the process of gratuity amount transfer/deposit into the employee’s account after the date of relieving.

That’s all folks! Gratuity is an important employee benefit and everyone must be aware of the rules and regulations that are implied for fair and successful gratuity claims.