If you are stuck in such a situation, here is what to do.

Mr. Sameer recently completed five years of continuous service at “Tech Innovations LLP,” a software development firm based in a major metropolitan city. He had heard from his colleagues that after completing five years, an employee is entitled to receive a gratuity payment from their employer. His understanding was that this amount is calculated as approximately 15 days’ salary for every year of service he has put in. This would mean a significant payout equivalent to about 75 days of his salary. However, he was unsure if this rule, which is commonly associated with private limited companies, also applies to a Limited Liability Partnership (LLP) like his firm. He was also contemplating the best way to approach his HR department to inquire about this without creating any friction.

Advice in such cases

If you find yourself in a similar position, wondering about your gratuity entitlement, here is some initial advice:

• Review your employment contract and the company’s HR policies. Sometimes, the terms regarding gratuity are mentioned in these documents.
• Understand the applicability of the Payment of Gratuity Act, 1972, to your specific organization. The key factor is often the number of employees.
• Prepare to make a formal application for gratuity when you decide to leave the organization. The process is straightforward and initiated by the employee.
• Keep all your employment records, such as your appointment letter, salary slips, and any communication regarding your resignation or retirement, safe and accessible.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

The primary legislation governing gratuity in India is the Payment of Gratuity Act, 1972.

• Section 1(3) of the Act specifies its applicability. It applies to every factory, mine, oilfield, plantation, port, and railway company.
• Section 1(3)(b) is crucial here: it extends the Act’s provisions to “every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months.”
• An LLP, if it is registered as a “shop” or “establishment” under the relevant State’s Shops and Establishments Act and employs 10 or more people, is legally obligated to pay gratuity. The structure (LLP, Private Ltd., etc.) does not matter as long as these conditions are met.
• Section 4 of the Act outlines the condition for payment of gratuity, which is payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years.
• Section 2(e) defines an “employee,” and Section 2(s) defines “wages,” which includes basic pay and dearness allowance for the purpose of calculation.

If you are the complainant

If you are an employee who believes you are entitled to gratuity but are unsure how to proceed, or if your employer is unresponsive, you become the complainant or applicant in this context. Here are the steps to follow:

• Formal Application: You must submit a written application for gratuity to your employer, typically using Form ‘I’ as prescribed under the Act. This should be done within 30 days from the date the gratuity becomes payable (i.e., your last working day).
• Calculation: Ensure you have correctly calculated the gratuity amount. The formula is: (Last drawn monthly salary [Basic + DA] / 26) * 15 * Number of completed years of service. A service period of over six months is rounded off to the next full year.
• Wait for Response: The employer is legally required to determine the gratuity amount and make the payment within 30 days of receiving your application.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

If your employer refuses to pay the gratuity, pays a lesser amount, or fails to make the payment within the stipulated 30-day period, you are considered the aggrieved party or “victim” of a statutory violation. Your recourse is as follows:

• File a Complaint: You can file a complaint with the Controlling Authority of your area, who is typically the Assistant Labour Commissioner or another designated officer under the Labour Department. This is done by submitting an application in the prescribed Form ‘N’.
• Hearing: The Controlling Authority will issue a notice to both you and the employer for a hearing. You will both be given an opportunity to present your case and evidence.
• Order for Payment: If the Authority finds your claim to be valid, it will issue an order directing the employer to pay the gratuity amount, often along with interest for the period of delay.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

The police have no direct role in disputes related to the non-payment of gratuity. This is a civil matter governed by labour law, not criminal law. The entire process is managed by the Labour Department and the Controlling Authority appointed under the Payment of Gratuity Act, 1972. You should not approach the police for such issues. The enforcement mechanism involves the Controlling Authority, and if the employer fails to comply with their order, the amount can be recovered as an arrear of land revenue by the Collector’s office.

FAQs people normally have

• Is an LLP covered under the Gratuity Act?
  Yes, an LLP is covered if it falls under the definition of a “shop or establishment” as per the respective state’s law and has employed 10 or more people on any day in the preceding 12 months. Once the Act applies, it continues to apply even if the number of employees later falls below ten.
• Is the gratuity calculation of “15 days’ salary per year” correct?
  Yes, that is the correct basis. The law specifies the formula as 15 days’ wages for each completed year of service. For calculation purposes, a month is considered to have 26 working days.
• What constitutes “continuous service” of 5 years?
  An employee is deemed to be in continuous service if they have been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, or a strike which is not illegal. For gratuity purposes, completing 4 years and 240 days of service in the fifth year is considered as 5 years of continuous service.

What evidence is required?

To successfully claim your gratuity, especially in case of a dispute, you should have the following documents ready:

• Appointment letter to prove the date of joining.
• Salary slips (especially the last one) to establish your last drawn wages (Basic + DA).
• Resignation letter and the acceptance letter from the employer, or a termination/retirement letter, to prove the last working day.
• A copy of the gratuity application (Form ‘I’) you sent to the employer.
• Any other communication with the employer regarding your employment or gratuity claim.

How long will the investigation take?

The timeline can be broken down into two stages:

1. Employer’s Timeline: After you submit your gratuity application, the employer has 30 days to make the payment.
2. Controlling Authority’s Timeline: If the employer fails to pay and you file a complaint, the proceedings before the Controlling Authority can take a few months. While the Act aims for a speedy resolution, the actual time can vary from 3 to 6 months or more, depending on the complexity of the case and the workload of the authority.

Advocate Sudhir Rao, Supreme Court of India