Recently in the interest of employees Gratuity A big decision has been given about which millions of employees have been relieved. Gratuity is an important retirement benefit, which is given to the employee at the end of his service. It is often seen that many companies cut the gratuity amount or delay payment, causing financial problems to the employees.
Now after the new decision of the High Court, employees will get their entire gratuity amount without any deduction, provided they have completed the minimum service period. The importance of gratuity also increases because it form the basis of economic security of the employee’s future. After this decision, employers cannot refuse to give gratuity under any circumstances, no matter what the company’s economic condition is.
The court has also clarified that the gratuity will be paid on the basis of the final salary of the employee and any improper cuts in it will be considered unconstitutional.
New gratuity rules update:
This decision of the High Court has made many important changes in the gratuity rules, which will now give more benefits to the employees. Let us know the main points, eligibility, calculations, and changes after the High Court’s decision.
What is gratuity?
- The gratuity is a lump sum amount, which the employee gets in a state of termination, retirement, death, retrenchment, or contract expiration.
- For this, the employee has to serve continuously for at least 5 years.
- The gratuity is calculated based on the final salary and service period of the employee.
High court decision
- Employees will get their full gratuity amount, any type of deduction is unconstitutional.
- Employers cannot refuse to give gratuity.
- The payment deadline will have to be 30 days compulsory, otherwise interest will have to be paid.
- Now gratuity will be found not only in retirement, but also in cases like contract termination, death, trimming.
Gratuity law
| aspect | Details/New Rule (as per High Court) |
|---|---|
| Minimum service | 5 years |
| Eligible employee | Government/Private Sector, 10+ Staff |
| What is included in salary | Basic + DA + other fixed allowances |
| Maximum gratuity limit | ₹ 20 lakh (Consider to increase limits) |
| Calculation basis | Last total salary (including fixed allowances) |
| payment deadline | 30 days (compulsory), interest on delay |
| Appeal/Grievance Process | Direct justice through court |
| Gratuity | Retirement, contract expiration, death, trimming |
| Complaint status | The court can take cognizance automatically |
| Tax exemption | Tax free up to ₹ 20 lakh |
Gratuity Eligibility and Rules
- The employee has served at least 5 years continuously.
- The company has 10 or more employees.
- Employees of all areas like government, private, factory, mine, railway, port etc. are eligible.
- Gratuity retirement, death, trimming, contract expiration, VRS etc. are found in all conditions.
- Payment of gratuity is mandatory within 30 days, otherwise the employer will have to pay interest.
Gratuity Calculation Formula
1. Employees covered under Gratuity Act
Formula:Gratuity = last salary <26 × year of service year \ text {gratuity} = \ text {last salary} \ Times \ Frac {15} {15} {26} \ text
- Last salary = basic + DA + Fix Allow
- Years of service: Round-off in next year when exceeding 6 months
Example:
If your last salary is ₹ 80,000 and you have served 10 years 4 months, then gratuity: 80,000 × 1526 × 10 = ₹ 4,62,00080,000 \ Times \ Times \ Frac {15} {15} {26} \ Times 10 = ₹ 4,62,000 × 2615 × 10 = ₹ 4,62,000
2. Employees not covered under the Gratuity Act
Formula:Gratuity = final salary \ text {gratuity} = \ text {last salary {15} {15} {30} {30} \ text {year of service
Example:80,000 × 1533
Comparison of old and new rules
| aspect | Old law | New Rules (as per High Court) |
|---|---|---|
| Minimum service | 5 years | no changes |
| What is included in salary | Only Basic + DA | Basic + DA + other fixed allowances |
| Maximum limit | Up to ₹ 20 lakh | Consideration on increasing limits continues |
| Calculus base | Last basic salary | Total last salary (including fixed allowances) |
| Appeal procedure | Labor commissioner | Direct justice through court |
| Pay time limit | 30 day | Compulsory 30 days, otherwise interest |
| Complaint status | Employee effort | The court can take cognizance automatically |
Other important points related to gratuity
- Gratuity is tax free, up to maximum ₹ 20 lakh.
- The employer can also pay more amount, but the tax exemption is only up to ₹ 20 lakhs.
- For gratuity, the employee has to fill Form F.
- If there is no payment, the employee can go to the court.
- Gratuity is different from PF or pension – it is a lump sum.
Comparison of gratuity and other benefits
| Benefit | Gratuity | Provident Fund (PF) | Pension |
|---|---|---|---|
| Pay time | Lump sum at the end of service | Monthly contribution, in service period | Monthly after retirement |
| Eligibility | 5 years service | No minimum limit | After retirement |
| Tax exemption | Up to ₹ 20 lakh | Tax exemption is different | Tax rules apply |
| Contribution | By employer | Employee + employer | Employer/government |
| Amount | On the basis of final pay | On the basis of contribution and interest | On the basis of service period and salary |
What is the benefit of employees after the High Court’s decision?
- Now the employees will get their full gratuity amount, there will be no deduction.
- It will be mandatory to pay interest to the employer if the payment is delayed.
- Employees can take direct justice through the court.
- The calculation of gratuity will now include fix allowances, which will increase the amount.
- Apart from retirement, gratuity will also be found in other conditions (death, pruning, contract expiration).
Gratuity related questions often asked
- Can you get gratuity on less than 5 years of service?
Generally not, but in some cases (death, accident) may be found. - If the company is less than 10 employees, will the gratuity get?
The act will not be applicable to the company, but the employer can give it. - How much tax is on gratuity?
Tax is free up to ₹ 20 lakh, tax will be applicable. - What to do when payment is delayed?
Employees can complain to the court or labor commissioner.
conclusion:
The new decision of the High Court has given huge benefits to the employees in terms of gratuity. Now the employees will get the full gratuity amount according to their service and the employers cannot make any kind of deduction. This will further strengthen the future economic security of the employees.
Disclaimer: This article is based on available public information and recent High Court’s decision. The decision of the High Court is real and there have been changes in the rules related to it, which will give more benefits to the employees now. However, take specialist advice in any legal action or individual case. Rules can change from time to time, so see the latest government notification or court order.
