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The Coffee Break Guide to Compliance – Vol. 8

Posted by: on 26 July 2018 in HR, Human Capital Management

This post is part of the Coffee Break Guide to Compliance by Anandan Subramaniam. Please subscribe to the blog updates if you’d like to be notified of these posts. As always, your questions are welcome: please comment below with your doubts and queries.

The Coffee Break Guide to Compliance – Vol. 8 {Employer’s Duty in Complying with the Provisions of ‘The Payment of Gratuity Act & Rules’}

The Payment of Gratuity Act, 1972 is a piece of social welfare legislation and deals with the payment of gratuity, which is a kind of retirement benefit like Pension, Provident Fund etc. In a specific ruling, the Hon’ble Bench of the Supreme Court of India has held, “As regards the provisions of the Payment of Gratuity Act, 1972 (as amended from time to time) it is no longer in the realm of charity but a statutory right provided in favour of the employee.”

In such a situation, it is the Employer’s duty to ensure and comply with the provisions of the Act. Among others, the main duties of an Employer are discussed below.

1. Notice of Opening, Change or Closure of the Establishment

  • Within thirty days of the rules becoming applicable to an establishment, a notice in ‘Form A’ shall be submitted by the Employer to the controlling authority of the area.
  • A notice in ‘Form B’ – within thirty days of any change in the name, address, of employer or nature of business.
  • Where an Employer intends to close down the business, he shall submit a notice in ‘Form C’ at least sixty days before the intended closure.

If the establishment does not have any branches other than in the State of their registered office, the notice is to be submitted to the State Labour authorities. If the establishment does have branches in other States, then the notice is to be submitted to the Central Labour authorities.

2. Display of Notice & Abstract

  • The Employer shall display conspicuously a notice at or near the main entrance of the establishment in bold letters in English and in a language understood by the majority of the employees specifying the name of officer with designation authorised by the Employer to receive on his behalf notice under the Act or the rules.
  • A fresh notice shall be displayed immediately after the notice referred to in sub-rule (1) becomes illegal or requires a change.
  • The employer shall also display an abstract of the Act and the rules made there under as given in ‘Form U’ in English and in vernacular language at a conspicuous place at or near the entrance of the establishment.

3. During the process of selection of an Employee, the Employer must ensure the obtaining of details of gratuity availed by the candidate in his/her previous establishment.

4. Nominations

  • A nomination shall be ‘Form F’ and submitted in duplicate by personal service by the Employee, after taking proper receipt or by sending through registered post acknowledgement due to the employee.
  • An Employee who has no family at the time of making a nomination shall, within ninety days of acquiring a family, submit a fresh nomination, in duplicate in ‘Form G’.
  • A notice of modification of a nomination, including cases where a nominee predeceases an Employee, shall be submitted in duplicate in ‘Form H’.

5. Notice for Payment of Gratuity

  • Within fifteen days of the receipt of an application under Rule 7 for payment of gratuity, the Employer shall,
    • if the claim is found admissible on verification, issue a notice in ‘Form L’ to the applicant Employee, nominee or legal heir, as the case may be, specifying the amount of gratuity payable and fixing a date not later than the thirtieth day after the date or receipt of the application, for payment thereof; or
    • if the claim for gratuity is not found admissible, issue a notice in ‘Form M’ to the applicant Employee, nominee or legal heir, as the case may be, specifying the reasons why the claim for gratuity is not considered admissible.

6. Mode of Payment of Gratuity: The Gratuity shall be paid by a crossed cheque or Demand Draft to the eligible Employee or nominee or legal heir, as the case may be.

7. Compulsory Insurance to protect employers liability of payment of Gratuity in the State of Andhra Pradesh: Every employer other than an employer of an establishment belonging to, or under the control of, the Central Government or a State Government, shall subject to provisions of sub section (2) under section 4A of the Act, obtain an insurance in the manner prescribed under sub-section (4) of section 4A of the Act for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India or any other Insurance Company incorporated under the Company’s Act, 1950.

8. Finally, do comply with payment of Gratuity to separated Employees who were engaged through Fixed Term Employment, irrespective of eligibility of completion of five (5) years of service.

Do comply and be delighted.

 


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