I had collated the below data regarding gratuity.
Request you to please advise if there is anything missing.
For any employee to receive a gratuity fund in India, he should satisfy any of the following Gratuity Eligibility criteria:
An employee should have rendered his/her services in an organization continuously for a minimum period of 5 years with a single employer.
An employee should be eligible for superannuation.
If an employee retires from his/her services.
Death of the employee or an employee suffers disability due to accident or ill-health.
A person is eligible to receive gratuity only if they’ve completed 5 years of service with a single organisation, however, it can be paid earlier in case the employee dies or becomes disabled due to disease or accident.
The 1972 Payment of Gratuity Act has divided non-government employees into two categories:
Employees covered under the act
Employees not covered under the act
An employee will be covered under the Act if the organisation employs at least 10 persons on a single day in the preceding 12 months. And once an organisation comes under the purview of the Gratuity Act, then it will always remain covered even if the number of employees falls below 10.
For employees covered under the Act
There is a formula using which the amount of gratuity payable is calculated. The formula is based on the 15 days of last drawn salary for each completed year of service or part of thereof in excess of six months.
The formula is as follows: (15 X last drawn salary X tenure of working) divided by 26
Here last drawn salary means basic salary, dearness allowance, and commission received on sales.
If you have worked for six months or more in a year, it is considered as one year for gratuity calculation. If you have worked less than 6 months in a year, that year is ignored.
Gratuity Act will be applicable to the employees who have continuous service as prescribed under the Act. generally, foreign employees (ex-pats) are deployed in countries as per the terms of employment agreed upon - so if the tenure of such employment brings such foreign employee within the ambit of gratuity applicability or if there is an arrangement agreed by the parties in the employment terms - it will be in accordance with such arrangement
Usually, ex-pats are provided with their country-specific benefits and deployed in other countries for fixed terms and extended based on the requirements or moved to another country or returned back to their country. The benefits are distinguished clearly in the employment terms
As per the Act - “employee” means any person (other than an apprentice) employed on wages, [3] [***] in any establishment, factory, mine, oilfield, plantation, port, railway company, or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, [4] [and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity].
Thank you for the response Kaulin and thanks to Bhuvana Anand also. The employee is completing 5years by this month end. But he is working here based on employment agreement with 2years/1year contract and every time new contract only not extension. Only Basic salary mention in USD and other benefits.
Do we require to consider Gratuity as per our labour law since he is getting continuous salary and PF deductions as well.
A few points to be considered ---- Generally, the salary received by the employee for rendering services in India would be liable to tax in India Hence, any salary/ allowance/ benefit paid to an ex-pat employee which is related to an assignment period in India will be subject to tax in India. So when the employment contract is stipulated for a period of one or two years, the question arises whether the applicable benefits and deductions are taken into consideration.
An ex-pat (foreign passport holder), working for a ‘covered establishment’ in India and coming from a country with which India has no Social Security Agreement, is mandatorily required to contribute PF.
Salary payments made to ex-pats are required to be reported electronically in Form 15CA and Form 15CB in case they are chargeable to tax in India. The ex-pats who have already rendered five years of services reserve the right to claim gratuity from the Indian employer at the time of termination.
So you have to look into the above aspects and see if the employee’s continuous service comes within the ambit of section 2A of the Gratuity Act and comply accordingly.
Kindly note, the above is not a legal opinion. You should consult with your consultant and comply as required.
