Gratuity on resignation: DA, set-off and interest
Manjit Kaur was a clerk in a Ludhiana cooperative store with 18 employees. She joined on 1 August 2014 and resigned with effect from 15 September 2019, giving 15 days' notice against the 30 days required by her appointment letter. Her last drawn wages comprised basic pay of ₹24,000 and dearness allowance of ₹4,000. The society computed gratuity as 15/26 × ₹24,000 × 5 years, i.e. ₹69,231, deducted ₹15,000 as 'notice shortfall', and paid ₹54,231 seventy-five days after her resignation. Its letter says dearness allowance is excluded because it is a variable allowance, that gratuity is a gratuitous payment which the employer may adjust against its dues, and that in any case five years' service was not completed because of leave taken in 2016. Her service record shows 240+ days of work in every year, including 2016. She approaches the Controlling Authority in December 2019.
1. Is Manjit Kaur eligible for gratuity, and what is the correct amount?
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Eligibility under section 4(1) requires continuous service of five years. She served from 1 August 2014 to 15 September 2019 - five years, one and a half months - so the threshold is crossed. Section 2A defines continuous service as uninterrupted service, and treats a year as continuous where the employee actually worked 240 days (190 in seasonal establishments); her record shows 240+ days every year, so the 2016 leave does not create a break. Leave, sickness and cessation of work not due to the employee's fault are expressly protected.
Wages for computation. Section 2(s) includes dearness allowance within 'wages' and excludes only bonus, commission, house rent allowance, overtime and other allowances. DA of ₹4,000 must therefore be added, giving ₹28,000.
Computation. Gratuity = 15/26 × last drawn wages × completed years = 15/26 × ₹28,000 × 5 = ₹80,769 (approximately). The ₹20 lakh ceiling is irrelevant. The society's figure of ₹69,231 is understated by ₹11,538.
2. Can the society deduct ₹15,000 for short notice or adjust its dues against gratuity? How much is still payable?
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No. Forfeiture of gratuity is permitted only under section 4(6), and only for the specified grounds - termination for wilful omission or negligence causing damage or loss (to the extent of the loss), riotous or disorderly conduct, or an offence involving moral turpitude - and only where the termination is on those grounds. Resignation after five years attracts no forfeiture. Short notice is not a section 4(6) ground, and the society's claim for notice pay, if it has one under the appointment letter, is a separate civil claim to be pursued separately, not a self-help deduction.
Section 13 also protects gratuity from attachment in execution of a decree, which reflects the legislature's intent that it is a statutory right, not a bounty adjustable at the employer's will.
Amount due. Correct gratuity ₹80,769 minus ₹54,231 already paid = ₹26,538, made up of ₹11,538 on account of DA plus the ₹15,000 wrongly withheld.
3. Which forum should she approach, and what can be claimed for the 75-day delay?
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The application lies under section 7 before the Controlling Authority appointed under section 3 - in Punjab, the designated Labour Officer/Assistant Labour Commissioner for the area. An appeal lies to the Appellate Authority under section 7(7) within 60 days of the order.
Delay. Gratuity becomes payable within 30 days of the date it falls due. Where the employer defaults, section 8 makes it liable to pay simple interest at the rate prescribed (10% per annum under the Central Rules) for the period of delay. Here the payment was 75 days after resignation, i.e. about 45 days beyond the 30-day window; interest on ₹80,769 for 45 days at 10% works out to roughly ₹1,000, and the Authority may direct it in addition to the balance.
She should claim ₹26,538 plus interest, and the Authority can also direct payment within a specified period with further consequences for non-compliance.