Under the New Labor Code, gratuity rules have undergone a major change: employees no longer have to wait five years for this payment. They will be eligible for gratuity even after working for just one year. However, you must keep in mind that under certain circumstances, the company may flatly refuse to pay this amount. Therefore, it is extremely important to understand the serious mistakes that can cost you a serious loss of your hard-earned money.
Circumstances can a company refuse to pay gratuity
No company can withhold an employee’s gratuity without a valid reason. However, there are specific circumstances under the Payment of Gratuity Act where the company has the right to withhold this payment.
If serious allegations are proven against an employee, such as violence, abuse, threats, harassment, or if the employee knowingly violates company policies, the company may withhold gratuity.
If the employee’s negligence has caused significant losses to the company, the company can deduct gratuity equal to the amount of that loss. However, this cannot be done without evidence.
If the employee has committed a crime such as theft, bribery, forging documents, or fraud and is proven guilty, the company can withhold the entire gratuity.
If the company is not covered by the Gratuity Act, the payment of gratuity is at the company’s discretion. In this situation, the employee cannot make a legal claim.
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The company must follow evidence and procedure
If a company withholds an employee’s gratuity, it must first provide evidence and reasons for the same. It must issue a show-cause notice to the employee for each reason. Both parties are then heard. Gratuity will only be withheld if the employee is found guilty. However, even in such a situation, the company will only deduct the amount of damages incurred.
What are the new and old rules for gratuity
If a company employs 10 or more employees, it is mandatory to pay gratuity. After the implementation of the new labor code, an employee is now eligible to receive gratuity even after working for one year. Previously, this limit was 5 years. Gratuity is calculated using a specific formula: Gratuity amount = (last salary) * (15/26) * (number of years worked at the company).
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