A
Landmark Judgment from theHon’ble Supreme Court on 07-03-2019
Makes
Payment
of Gratuity Act fully Applicable to Schools
In
para number 28 of its judgment dated
March 07, 2019
the
Honorable
Supreme Court ruled that “
In
the light of the amendment made in the definition of the word “employee” as
defined in Section 2(e) of the Act by Amending Act No. 47 of 2009 with
retrospective effect from 03.04.1997, the benefit of the Payment of Gratuity
Act was also extended to the teachers from 03.04.1997”.
(For this
judgment you may visit at https://main.sci.gov.in/supremecourt/2008/11160/11160_2008_Judgement_07-Mar-2019.pdf). This is a landmark
judgment about Payment of Gratuity Act from the highest court of our country
favoring Teachers who are engaged in a very noble profession of educating our
younger generation and provides coverage to them under the Payment of Gratuity Act (herein after referred to as The Act).
Therefore it is clear that The Act
provides coverage to all employees of schools including Teachers and The Act has become fully applicable to
Schools if they have 10 or more than 10
employees at present or at any time in the past.
II A Brief of the Salient
Features of gratuity benefits under The Act is produced herein below for
information of the Schools.
1.
Responsibility
to pay gratuity is of the Employer.
(i)
As soon as Gratuity becomes payable, it is
responsibility of the employer to determine the amount of gratuity and inform
it to the concerned employee in writing.
(ii)
The employer shall arrange to pay the amount of
gratuity within 30 days from the
date when it becomes mandatory.
(iii)
If the amount of gratuity is not paid within 30 days then the amount of gratuity and
simple interest will be paid by the employer to the employee for the duration
when the payment is not made to the employee.
2.
Payment
of Gratuity.
Gratuity shall be payable to an employee on the termination
of his employment after he has rendered continuous service for not less than
five years,-
(a) on his superannuation, or
(b) on his retirement or resignation,
(c) on his death or disablement due to
accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where
the termination of the employment of any employee is due to death or
disablement.
3.
Wages forming the basis of Calculation of
Gratuity Benefit.
Gratuity
Benefit is calculated on the basis of terminal wages of an employee. These
wages include Basic Salary and Dearness Allowance only.
4.
Method of Calculation of Gratuity Benefit.
Gratuity
Benefit is calculated according to the following Formula:-
(15/26) multiplied by (No. of Completed Years of Service on Exit)
Multiplied by
(Terminal Wages)
5.
Ceiling Limit.
The
amount calculated according to the formula given in 4 above is subject to a
ceiling limit of `20,00,000/- (Rupees: Twenty
Lakhs). This is the ceiling limit at present.
6.
Generally Gratuity Benefit Increases.
Benefit
under The Actgenerally increases. Examples are:-
a. When
Accrued Service increases
b. When
there is increase in wages. Wages increase with each year of increase in
service. Increase may be caused due to a revision of wages, annual increment,
inflation and increase in Dearness Allowance etc. etc.
c.
When The Act is amended. There is a long
history of amendments of The Act bringing increases in the benefit.
d.
When vesting period is reduced. The present vesting
period is 5 years. If this period is reduced, the Benefit will be payable on
resignation/early withdrawal from service on reduced period of service.
e.
When ceiling limit is increased. The ceiling limit
is increased several times by amending The Act.
In this simple
write-up we have given an overview of The Act and in our subsequent
writings we will come to you with other details connected with the
Accounting of Liabilities caused by the obligation imposed by the Act on
School Managements. We will welcome any query from the readers.
For more details or consultation/Advise on the above matter, you may contact me at 9211637063 or email me your queries at tikaramchaudhary@gmail.com
Tikaram Chaudhary
Gratuity & Leave Encashment Trust Fund Consultant
(More than 10 Years of Experience in providing Support Services for Actuarial Valuations under Gratuity and Leave Encashment and Formation of Gratuity and Leave Encashment Trusts)
Office Address : R 11, F/F, R Block, Vikas Nagar, New Delhi -110059
Mobile Number : 9211637063
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