Archive

Posts Tagged ‘Employee Benefits’

HRA Exemption Limit – Changes

November 19, 2013 Comments off

Source : – Livemint

If you plan to claim tax exemption under house rent allowance (HRA) for the current financial year, remember that you will have to furnish the Permanent Account Number (PAN) of your landlord if your annual rent exceeds Rs.1 lakh, or Rs.8,333 per month. Earlier you had to furnish PAN of your landlord only if annual rent exceeded Rs.1.80 lakh, or Rs.15,000 per month.

What’s the change?
According to a circular (http://tinyurl.com/luyxazk) issued by the Central Board of Direct Taxes (CBDT) on 10 October 2013, if annual rent paid by an employee exceeds Rs.1 lakh per annum, it is mandatory for the employee to report PAN of the landlord to the employer. The new circular replaces the earlier circular wherein for financial year 2011-12 onwards, CBDT had stated that while computing the tax liability employees who are paying house rent of more than Rs.15,000 per month and are claiming exemption under HRA are required to furnish a copy of the PAN card of the landlord.
What is the exemption?
Under section 10 (13A) of the Income-tax Act, if you are a salaried individual and get HRA from your employer, you are entitled for tax exemption. In order to claim tax exemption, you need to produce house rent receipts. For administrative ease, salaried employees who get house rent allowance up to Rs.3,000 per month don’t have to produce rent receipt.
This concession is only for the purpose of tax exemption at source. However, the assessing officer can ask for a receipt, if required, as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.
For any rent above Rs.3,000 per month, you have to produce a rent receipt to claim tax exemption. The actual HRA exemption that one can avail under section 10(13A) would be the minimum of the following: the actual amount of HRA received, or 50% of the salary for individuals residing in metros (Delhi, Mumbai, Chennai or Kolkata) and 40% of the salary for individuals living in non-metros, or the rent paid minus 10% of the total salary.
What should you do if your landlord doesn’t have PAN?
If your landlord doesn’t have a PAN, you have to make a declaration. According to the CBDT circular, in case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee

House Rent Allowance (HRA) – Common Issues

February 19, 2013 9 comments

House rent allowance is one of the key components of wages paid to an employee. The object of payment of HRA is to enable an employee to meet the expenses incurred by him for hiring an accommodation at his place of work. Some frequently asked doubts about HRA are addressed below

1) Is it compulsory to pay HRA as part of wages to an employee?

No. It is not compulsory for an employer to pay certain sum as HRA as part of the wages unless there is a statute (law) in that state making payment of HRA at certain minimum rate as compulsory.

2) Is there any statute making payment of HRA as compulsory?

Certain states like Maharashtra have enacted law namely the Maharashtra Workmen’s Minimum House Rent Allowance Act 1983 where by an employer covered under the Act, is required to provide HRA at minimum rate to workmen. Therefore one needs to check with regard to one’s state about the existence of any such law.

3) Is there any specified formula in fixing the quantum of HRA in the industry?

Except where there is a statutory provision in states like Maharashtra, there is no prescribed formula for fixing the quantum of HRA.

4)  Whether HRA can be uniform for all places?

No.HRA cannot be uniform for all places in order to be realistic. For example, a company fixes HRA at Rs.1500/- for an employee working in a small city. However the same amount cannot be said to be realistic for an employee working at a lage city, where he is compelled to hire accommodation at far higher rates.

5) In the absence of any fixed formula or rule, what are the factors that are relevant to fix the quantum of HRA?

The following are the factors that can be considered as relevant.

i) HRA shall be linked to the place of work/posting of an employee but not to the place of the residence of his family. For example an employee is working at Nasik but his family is staying at Mumbai for education of his children. He is eligible for HRA at the rates fixed for Nasik town but not at the rate fixed for Mumbai.

ii) It shall bear reasonable relationship to the rental values prevailing at his place of work.

iii) It shall be commensurate with the status, roles and levels of the employees. For example the HRA drawn by a junior officer and a Senior Manger cannot be the same. The company needs to have a pragmatic formula, having regard to the size of accommodation which it considers as adequate for each class of employee.

6) What are the sources that can be looked for guidance in deciding the quantum of HRA?

On can look for the following sources
i) The statute, if any prevailing in any state providing for payment of HRA
ii) The HRA paid across  the industry or the companies of similar nature and size, located in the same region in which the company in question is located, can also be adopted as a norm.

7) Is HRA and house rent reimbursement the same?

NO. HRA is paid as part of salary every month as any other regular allowance like dearness allowance. Whereas in the scheme of house rent reimbursement, no HRA is paid and an employee is required to produce rent receipt or some evidence, prescribed by the company for having incurred the expenses towards the rent of his accommodation upon which the company reimburses him the said amount.

8) Is HRA also payable as part of wages when employee is also claiming reimbursement of house rent?

No. The employee is either eligible for HRA or for house rent reimbursement.

9) Is HRA also to be deducted when an employee is on leave without pay?

Yes. When HRA is paid as part of salary, it is to be deducted when an employee is on leave without pay.

****************************************************************************************************

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc.

The opinions expressed in the various blog posts on this site are those of the respective authors and are not necessarily endorsed by Talentmoon Human Capital Solutions LLP ( ” Talentmoon”)  or its Partners.  The guest posts on the various Labour laws and acts are only intended to present these laws in simplified language and they are not to be construed as legal interpretations or legal advice. The replies to various comments & queries on these blogs are based on the understanding of these Acts and laws, by the guest Author and the reader is advised to use his discretion and take appropriate legal opinion before acting on these posts & comments.

Talentmoon is not a law firm and none of its partners are legal practioners

Key Amendments to Workmen’s Compensation Act 1923

July 25, 2012 1 comment

In continuing with our effort to present the various labour laws in a layman’s language, a brief update is provided on Workmen’s Compensation act 1923.

S.NO Section Pre-amended position Post-amended position
1 Title Workmen’s Compensation Act 1923 Tile of the Act amended to “Employees Compensation Act 1923”.
2 Words and expressions Refer to the words ‘workman’ or ‘workmen’ in the Act They are substituted by the words ‘employee’ or ‘employees’ wherever they occur.
3 Schedule II Clerks were not covered for compensation under the Act. Clerks are now covered for compensation. Please refer to  schedule-II for specified employments.
4 Sec.4 (a) The minimum ceiling limit of compensation for death was Rs.80000/- Now it has been revised to Rs1,20,000/-
5 Sec.4(b) The minimum ceiling limit of compensation for permanent total disablement was Rs.90000/- Now it has been revised to Rs1,40,000/-
6 Sub-Sec.2A of sec.4 Non-existent This sub-section was added after sub-section(2).This entitles an employee to reimbursement of actual medical expenditure incurred by him for injuries caused during the course of employment.
7 Explanation II to clauses(a)&(b) of Sec.4 of Sec.4 Explanantion –II prescribes the maximum wage limit at Rs.4000/- p.m for the purpose of computing compensation for death and permanent disablement The Explanation was omitted and a new sub-section (IB) has been added after Sub-section IA of sec.4 whereby the maximum wage limit has been revised to Rs.8000/-p.m
8 Sub-sec.(4) of Sec.4 The existing limit of funeral expenses is Rs.2500/- It has been revised to Rs.Rs.5000/-
9 Sec.25A Non-existent A new section has been added which fixes 3 months time limit for disposal of claims from the date of reference.

 

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc and currently advises Talentmoon and its clients.

Employee State Insurance – FAQ for Employers

May 26, 2012 13 comments

The Employees State Insurance Act has been amended extensively since 2010, altering the criteria of applicability of the Act to factories and employees that is critical in deciding coverage, contributions and compliances. The Act also incorporates some interesting provisions which are not paid much attention but nevertheless critical for employers to know. This post incorporates some such  inputs culled out from the provisions of the ESI Act and the case laws to serve as a guide and ready reference for the readers to attract their attention to them but not to serve as binding precedent on the issue.

A. Coverage of establishments

The ESI Act 1948 has been amended in 2010 with effect from 1st June 2010 to broad base the coverage of factories and establishments by amending the definition of factory under Sec.2(12). Prior to the amendment, factories running without power were covered only if they employ 20 or more persons and factories with less than 20 employees (but not below 10 employees)were covered if they run with power. The amendment in 2010 removed this distinction and a factory employing ten or more persons in the preceding 12 months, irrespective whether it runs with power or without power, is now covered.

As regards establishments other than factories, the appropriate government in terms of Sec.1(5) of the Act, can by notification, extend the applicability of the Act to such establishments. Thus the State governments extended the applicability of the Act to establishments like hotels, restaurants, shops, news paper establishments and road motor transport establishments employing 20 or more persons in line with the limit prescribed by the Act prior to the amendment. Accordingly the State Governments may be issuing appropriate notifications in accordance with the new amendment.

Thus the Government of Gujarat has issued a notification No.GHR-2012-04-ESI-18-2011-688529-M(3)  dated 3rd January 2012 extending the applicability of the Act to the above named establishments employing ten or more persons.

1. Whether the Act provides for voluntary coverage by employees and employer.

No. Unlike the P.F & M.P Act 1952, the ESI Act does not provide for voluntary coverage at the request of employees and employer.

B. Counting number of employees for coverage

1. How to count the ten or more or 20 or more number of employees?

Prior to the amendment of the Act, only the employees who are drawing wages up to Rs.15000/-p.m were included in counting ten or twenty  employees to determine coverage and others whose wages exceed Rs15000/- p.m were excluded. However after amendment in 2010, all employees irrespective of the wage limit are to be included counted to decide whether the factory or establishment is employing ten or twenty persons. It means that the employees who are not covered are also to be included now for counting the minimum number of employees. Thus the criterion for coverage has been broad based.

2. Whether contractor’s workers shall also be counted ?

Sec.2(9) of the ESI Act defines ‘employee’ as including not only employees directly recruited by the employer but also employees of the contractor (immediate employer) employed to do the work of the factory or establishment or to do any work connected with that of the establishment or factory. Therefore a contractor worker too shall also be included in counting the ten or twenty employees.

C. Coverage of employees

It is now well known that contractor workers who are working on the premises of the factory or establishment are covered by virtue of definition of ‘employee’ under Sec.2(9) of the Act . However there is confusion as to the fact whether such employees should work under the supervision and control of the principal employer in order to be ‘employee’ under the Act so as to be covered.

1. Whether supervision and control are necessary over the work of the contractor workers in order to make them employees for the purpose of coverage under the Act.

Sec.2(9) which defines ‘employee’ includes a person who is employed through a contractor, if such contractor worker is employed on the premises of the principal employer and Sec.2(9) does not make it necessary that such worker shall work under the supervision and control of the principal employer. It is enough if the contractor worker undertakes the work of the establishment or any work connected there with on the premises of the principal employer .Please refer to the case of All India Reporter Ltd V. ESIC 1985 LIC 1181 (Bom.HC).

2. In such case, whether a contractor’s worker doing a work connected with that of the establishment outside the premises of the principal employer is not to be covered

Such contractor worker too will be an employee within the meaning of Sec.2 (9) of the Act and will be covered even though he is working outside the premises of the principal employer subject to the following conditions —

1)      He should do the work of or any work incidental or part of the work of the establishment;

2)      He should work under the supervision and control of the principal employer or his agent .

Reference can be had to the case of Regional Director  ESIC V. Kerala Kaumudi 1987 II LLJ 508(Ker DB).

3.  Whether casual labour too are covered

The definition of employee under Sec.2(9) is too wide to include casual workers who are employed to do the work of or any work connected with that of the establishment. However, it will be difficult to stick liability to principal employer in case of every kind of casual work. For example, a casual loader who merely enters the premises of the principal employer and unloads some material like a gas cylinder and leaves the premises thereafter and it is not known when his next turn comes or whether he ever turns up again for the same job, may not be covered. A mere casual presence on the premises of employer to do some sporadic work cannot make a person as an employee under the Act. Please refer to the case of BOC India Ltd .V. Asst. Regional Director, ESIC 2005 I LLJ 224 ( AP.HC).

4. Whether apprentices are covered.

Sec.2(9) which defines ‘employee’ has been amended in 2010. The pre-amended section excluded apprentices employed both under Apprentices Act 1961 and under Standing Orders from coverage of Act. However the section 2(9) after the amendment includes the apprentices appointed under Standing Orders  under the definition of ‘employee’ and therefore covers them under the Act.

5. Whether a contractor who provides labour to the establishment shall also be covered?

No. A contractor  cannot be covered since he Is not doing any work of or connected with establishment and hence not an employee within the meaning of Sec.2(9) of the Act.

6. Whether an employee ceases to be an employee for the purpose of coverage under the Act if his wages exceed Rs.15000/-p.m on account of wage revision

No. Not on all occasions, he becomes excluded from being an employee on account of his wages exceeding Rs.15000/-p.m .It depends up on the time at which the increase in wages took place. For example, if his wages have been revised upwards from Rs.15000/-p.m to Rs.18000/-p.m  in the midst of the contribution period –say- in the month of May in the contribution period of April to September-

he continues to be employee till the end of the contribution period i.e  September and thereafter be ceases to be an employee for the purpose of coverage. Please refer to ESIC  V. S.S.R.S. Brothers 2000 I LLJ893 (Mad.s HC)

D. Computation of Wages for coverage of employees

The Act under Sec.2(9) read with Rule 50 of ESI Rules covers an employee whose wages do not exceed Rs 15000/- p.m. However there are doubts about wage limits and computation of wages for coverage of employee etc. Some of the clarifications are—

1. If the maximum limit is Rs.15000/- and is there any minimum wage limit under the Act?

No. The Act does not prescribe any minimum wage limit for coverage of employees.

2. Whether over-time wages are to be included for computation of Wages for the purpose of coverage of an employee

Sec.2(9) itself provides answer to this question. It excludes over-time wages while computing the wage limit of Rs.15000/-p.m.

3. If so, whether over-time wages too are to be excluded for the purpose of contribution?

The definition of wages under Sec.2(22) includes all remuneration paid or payable to an employee if the terms of contract of employment express or implied is fulfilled. Thus doing work of the establishment beyond the stipulated working hours forms part of the contract of employment and therefore remuneration paid for over- time work is wages within the meaning of first part of the definition. This part over-time wages are not specifically excluded from the definition of wages.Therefore contribution is payable on over-time wages. Please refer to Indian Drugs and Pharmaceuticals Ltd. V.ESIC 1997 I LLJ 700 (Supreme Court)

E. Contributions

1. Is contribution payable on conveyance allowance?

Sec.2(22) which defines wages excludes travelling allowance or the value of any travelling concession and thus obviate the need to pay contribution on it. However some companies are paying conveyance allowance to their employees. Thus questions arose whether such conveyance allowance is synonymous with travelling allowance and whether contribution is payable on such conveyance allowance. There are conflicting views by the courts on this issue till date. However the ESIC in 2001 has issued the following guidelines .

i)        If the conveyance allowance is paid as per the terms of any settlement or as per the terms and conditions of employment, it shall be treated as wage

ii)      If the same is paid by way of reimbursement against production of evidence or bills of having incurred the said expense or paid at intervals exceeding two months, it shall not form part of the wage.

2. Is contribution payable on subsistence allowance during suspension of an employee?

Yes. Contribution is payable on the subsistence allowance paid to an employee during his suspension since it was held as part of wages in ESIC V. Popular Automobiles 1998 ILLJ621 (Supreme Court).

3. Is contribution payable on amounts or incentives paid at employer’s discretion?

Sometimes employers pay certain amounts in their discretion out of good will or as a generous gesture to  employees either in appreciation of  their work or on account of some special occasion. Such amounts cannot form part of the wages since they are neither paid under a settlement or as part of contract of employment or at regular intervals of two months and hence no contribution is payable on them. Please refer to Braithwaite &CO v.(India) Ltd V. ESIC 1968 ILLJ550 (SC) and ESIC V.Bata Shoe Co. Pvt.Ltd. 1986 ILLJ 138 (Supreme Court) .

4. Is contribution payable on encashment of un-availed leave?

Yes. It is payable since such payment is construed as part of wages under Sec.2(22) of the Act. Please refer to Dy. Regional Director, Employees State Insurance Corporation V. Mizar Govind Annappa pai & Sons,Mangalore 2004 I CLR 472 (Karn HC)

5. Is the employee responsible to pay his share of contribution ?

Sec.40 lays down that it is the principal employer’s responsibility to pay employee’s contribution whether such employee is directly employed by him or through an immediate employer (contractor) and then recover employee’s contribution from the wages payable to him. Reference can be had to ESIC V.kerala State Drugs  & Pharmaceuticals Ltd. 1996 III LLJ 47(Supreme Court).

6. Is there any situation wherein an employee is exempted from paying contribution?

As per Rule 52 of the ESI (Central) Rules 1950, an employee whose average daily wage is Rs 100 or less (Rs.2600/-p.m or less) is exempted from payment of his share of contribution.

7. Is contribution payable on wages paid to an employee in lieu of notice of termination?

No. Notice pay is not a wage within the meaning of Sec. 2(22) of the Act since he is not deemed to have earned those wages for having done any work of the establishment

8. Is contribution payable when an employee whose wages exceed Rs.15000/- ?

If the wages exceed Rs.15000/- during currency of the contribution period- say  in the month of May during the contribution period of April –September- the employer is liable to pay contribution till the end of the contribution period i.e September. However no contribution is payable from the following contribution period. This made clear by the proviso to Sec. 2(9) of the Act

9. Can the principal employer deduct the expenses incurred by him for remitting the contribution to ESIC from the wages of the employee?

No. In terms of sec.40(5) of the ESI Act, the principal employer shall bear the expenses of remitting the contributions to the ESI corporation.

F. Critical information on benefits.

1. Whether an accident met with by an employee while coming to this place of work can be treated as an accident arising out of employment to enable the employee to claim appropriate benefit under the Act?

The ESI act was amended in 2010. The amendment has introduced a new section 51-E which states that an accident occurring to an employee while commuting from his residence to the place of employment for duty or from the place of employment to his residence after performing duty, shall be  deemed to have arisen in the course of employment, if nexus between the circumstances, time and place in which the accident occurred and employment is established such as that he has taken the regular route for the office at the same time and did not deviate from it etc.

2. How conviction of an employee affects his benefits?

In terms of the provisions of the Act and the Rules there under, an employee who is convicted of making a false statement under Sec.84 of the Act to get a payment or benefit to which he is not entitled or to get an increase in such a payment or benefit or to avoid any payment which he is required to make under the ESI Act, is not entitled to any cash benefit admissible under the Act for a period of three months for the first conviction and six months for each subsequent conviction.

3. How  strike affects an employee’s benefits?

In terms of the provisions of the Act, an employee who remains on strike is not entitled to sickness benefits or disablement benefit on any day on which he remains on strike.

G. Critical time limits to be noted by the employer.

The Act stipulates time limits for the employers to take action on issues which are critical from the employer’s rights and obligations point of view.

1)Contributions are to be paid by employer within 21 days of the last day of the calendar month in which the contribution falls due.(Regulation 31).

2)Return of contributions in Form 5 shall be submitted (Regulation 26)-

a) within 42 days of termination of contribution period ;

b) within 21 days of permanent closure of the factory or establishment

c) Within 7 days of  receipt of requisition from the ESIC.

3)If an employer seeks to dispute any claim of the ESIC with reference to any matter connected with contributions, he has to make an application before the Insurance Court under Sec.77 of the Act within three years from the date on which the cause of action arose.

4) In terms of sec.77, the ESIC has to make it’s claim to dues relating to a particular period within five years of the said period. For example, if the claim relates to the period April 2007, the claim shall be made within April 2012.

H. Critical information about obligations of the employer.

The above points clarify the common obligations of employers under the Act such as registration, payment of contributions and submissions of returns. However there are some critical obligations which do not frequently figure in discussions. They are –

1)      Bar on dismissal or discharge or punishing an employee during receipt of certain benefits

An employer is prohibited from dismissing or discharging or reducing benefits or otherwise punishing an employee except as provided under regulations during the period in which the employee is in receipt of sickness benefit or maternity benefit or disablement benefit for temporary disablement or during the period in which he is under treatment for sickness or is absent on account of illness arising out of pregnancy or confinement duly certified as per regulations.  (Sec.73 )

2)      A factory or establishment can be held liable to pay excessive sickness benefits, if the ESIC finds that the incidence of sickness of it’s employees is due to lack of sanitary conditions or improper maintenance of sanitary conditions.(Sec.69)

These points should help clarify the common questions that arise in minds of Employers.  For any further queries please post your comments or write to us at advisory@talentmoon.com

******************************************************************************************************

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc

Gratuity Simplified

April 16, 2012 16 comments

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Prior to enactment of the Payment of Gratuity Act 1972, gratuity was considered as a gift or bounty given by the employer to express his appreciation for the services of an employee at the time of leaving the service. Since the enactment of the Act, gratuity is being increasingly looked up on as the right  of the employee to his property lying in the hands of the employer to be claimed in future. However the Act, while imposing obligations on the employer, made it also clear that gratuity is subject to good conduct. Therefore it is necessary to know the basic frame work of the applicability and eligibility under the Act.

1. What establishments are covered by the Act?

The Act covers the following establishments ;

I)Factories employing ten or more workers if they are run with power or twenty or more workers without power.

2)Mines, oil fields and Plantations which are so defined under the relevant Acts.

3) Shops and commercial establishments employing ten or more persons on any day during the preceding twelve months.

However the Central Government can extend the application of the Act to any other establishment.

2. Who are excluded?

The central Government and State Government establishments are excluded from the Act.

3. Since there is always employee turn- over,  what happens if the number  of employees fall below ten at any time?

As per Sec.1(3-A), once the Act applies to an establishment, it continues to apply to it even after the fall in the number below ten employees.

4. Who are covered?

Sec.2(e) defines an “employee”. All employees whether they are workmen performing manual, skilled or semiskilled, unskilled, technical supervisory or clerical work or those performing managerial or administrative functions are covered. After broad basing the definition of employee  by amending the section recently, even teachers are also covered.

5. Is there any wage limit for coverage of employees?

No. The Act does not prescribe any wage limit unlike the P.F Act or ESI Act.

6. When an employee becomes eligible to claim gratuity?

An employee becomes eligible to claim gratuity on any of the following grounds after completing five years of continuous service.

I)       On attaining the age of superannuation or retirement

II)    On resignation

III)  On death even before completion of five years and

IV) On acquiring disability due to accident or disease even before completion of five years.

7. Whether an employee who resigns or leaves  the job  or due to closure before completing fifth year, can also claim gratuity?

Yes. An employee who could not complete the fifth year for any of the reasons but completes four years and 240 days (8months) is considered under law as having completed fifth year also and becomes eligible for gratuity.

8. How to compute gratuity?

Gratuity is to be computed at the rate of fifteen days wages last drawn by an employee for each completed year of service and service in excess of six months to be treated as one year as per the formula given below.

Monthly wages last drawn/26  x 15 x  no. of years of service

 9. What is the maximum limit for payment of gratuity?

It is now Rs.10,00,000/-

10. Can gratuity be attached?

No . It cannot be attached

11. What precautions to be taken  in making nomination?

i)       The employee shall submit nomination in the proper prescribed form within 30 days of completion of one year of service..

ii)     If employee has a family at the time of making nomination, they shall nominate only a member of their family not any one else since such nomination becomes invalid.

iii)   If they have no family at the time of making nomination, they can name any person as their nominee but on acquiring family, they shall modify or change the nomination in favour of his family member.

iv)  they shall duly sign the nomination form.

 12. Gratuity is subject to good conduct

Gratuity does not become payable automatically but is subject to good conduct. This fact is espoused by section 4(6) of the Act.

A)   The employer can forfeit gratuity either fully or partially in the following cases irrespective whether there is any financial loss or damage caused to the employer or not :

i)       if the employee indulges in disorderly or riotous behavior

ii)    if the employee is guilty of moral turpitude.

B)    The employer can forfeit gratuity to the extent of financial loss, if it is caused by  ;

i)        an omission of the employee or

ii)       negligence of  the employee

provided the employee is found guilty of the same in either of the above cases in a domestic enquiry

 13. Important obligations of the employer under the Act

a) With regard to insurance and registration

The employer has to obtain insurance cover for the gratuity that becomes payable and register his establishment with the Controlling Authority.

b) with regard to payment

i) As soon as the gratuity becomes payable, employer shall calculate the amount and  keep it ready

ii) On receipt of application of the employee , they shall inform the employee in the prescribed form whether or not gratuity is payable to him

iii) If gratuity is payable to an employee, the employer shall pay it within 30 days from the date it becomes payable.

c) with regard to display  on notice board

i) Employer shall display the name of the officer with designation, in bold letters in English or in the language understood by majority of employees at a prominent place, who can receive notices under the Act and rules on behalf of the employer.

ii) The employer has to display an abstract of the Act and Rules in the prescribed form in English or in the language understood by majority of employees at a prominent place.

d)  with regard to nomination

Employer shall obtain nomination form from an employee who completes one year of service  or any change thereof in the form prescribed under the rules

14. Important obligation of the employees

 i)       The employee shall make an application in the prescribed form as soon as he leaves the service so as to enable the employer to settle his claim at the earliest.

ii)     He shall submit the nomination form in the prescribed form on completion of one year or intimate any change in it also in the prescribed form.

iii)   He shall maintain good conduct during the tenure of his service to be eligible for gratuity.

15. Remedy against non – payment or short payment of gratuity

An employee aggrieved by either non-payment or short payment of gratuity can file an application before the Controlling Authority notified under the Act and thereafter, if any party is aggrieved by the decision of the  Controlling Authority, can make an appeal to the appellate authority.

…………………………………………………………………………………………………………………………………………………………………….

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc

Provident Fund- common issues faced by employees

April 8, 2012 1 comment

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

The object of the provident fund scheme is to secure the future of an employee after his retirement. Therefore employees are willing to contribute to the provident fund scheme so long as they are in employment. This is not to speak of other benefits in the form of income tax relief on contributions as well as on the lump sum amount of provident fund which an employee gets at the time of retirement.

Apart from many issues associated with job change such as relieving, service certificates, notice periods and bonds, that need to be sorted out by the employees at the time of leaving a job, another dilemma that nags their minds is how to protect their provident fund and pension fund which they cherish  to retain till the end of their service.

Common questions that are associated with changing a job

The following questions are commonly asked by people looking for a change in employment

  1. Whether they have to withdraw their PF amount
  2. Whether they can transfer  the PF amount from the PF account with the previous employer to that of the new employer
  3. Whether they are required to put in any minimum service for such withdrawal?
  4. What about their pension amount?

This post attempts to clarify these queries within the frame-work of the provisions of the P F Act 1952 and the P.F Scheme 1952 and the Employees Pension Scheme 1995, framed there under.

What are the relevant provisions of the Employees Provident Fund Scheme 1952 and the Employees Pension Scheme 1995

Sub-para (2) of Para (69) of the Employees Provident Fund Scheme 1952 states that an employee resigning or leaving an establishment covered under P.F Act can withdraw P.F amount standing to his credit if he does not join any other establishment which is also covered under the P.F within two months from the date of his resignation or exit from the previous covered establishment. It implies that if he joins a new establishment to which the P.F Act applies within two months from the date  of resignation or exit from the previous establishment, he cannot withdraw.

At this juncture, Para 57 of the Employees Provident Fund Scheme 1952 comes into picture. It permits an employee to transfer his P.F from his previous employer to the new employer whether located within the same region or in different regions, if one of them is a covered establishment.

However where the employee, after exhausting the waiting period of two months, joins an establishment that is  covered or exempted from the P.F Act, he can either withdraw his provident fund  or pension fund( if he has not put in ten years of service) or alternatively transfer his provident fund.

As regards the pension fund of the employee at the time of leaving an establishment that is covered by the P.F Act, an employee is eligible for drawing pension at the earliest under Para 12(8) of the Pension Scheme 1995 if he has rendered eligible service of  ten years or more and has attained the age of 50 years. Alternatively he can also obtain Scheme Certificate  from the Commissioner of provident Fund, if he subsequently joins a factory or establishment covered by the Pension Scheme 1995.  The Scheme Certificate shows the details of pensionable service and pensionable salary.

If he has not put in the minimum service of ten years at the time of leaving the establishment, he can withdraw the pension contribution as per the formula for calculation specified under Table –D appended to the Scheme in terms of Para 14 of the Pension scheme 1995.

Therefore, the aforesaid criteria of waiting period of two months, the service  put in by an employee and the age of the employee at the time of resigning from a covered establishment are to be borne in mind to explore the options available and the procedure to be followed for dealing with various situations  concerning the Provident fund and pension fund. To avoid being too legalistic in explaining the options and to simplify the understanding of the various situations that are likely to arise with regard to provident fund and pension fund at the time of leaving the service of an employee, a ready reckoner table  is provided below

S.No              Situation Provident Fund- whether can be withdrawn or be transferred Pension fund – whether can be withdrawn or continued u/ Scheme Certificate Relevant Forms to be filled.
1 Employee puts in less than 10 years of service and leaves a covered establishment & joins a covered establishment within the waiting period of two months Cannot be withdrawn – but can only be transferred to new establishment cannot be withdrawn but can be continued  u/Scheme Certificate to be surrendered to the new employer to protect his pensionable past service. 1)Form 13 for transfer if new establishment is located in the same region of P.F office or form 13-A, if new establishment Is located in different region.

2) Form-10-C for Scheme Certificate for pension fund

2 Employee puts in less than 10 years of service and leaves a covered establishment & joins an exempted establishment  whether within the waiting period two months or beyond it Can be withdrawn or alternatively get the P.F transferred to new establishment Can be withdrawn- or alternatively scheme certificate can be obtained to protect past pensionable service, if he joins again a covered establishment. 1)Form 19 for withdrawal or 2)Form 13 for transfer if both the establishment are located in the same region of P.f office or Form 13-A, if located in different regions and  3) Form 10-C for withdrawal of pension fund or for obtaining scheme certificate
3 Employee puts in 10 years or more of service and attains the age of 50 years or more at the time of leaving a covered establishment & joining a covered establishment within a period of two months Cannot be withdrawn – but can only be transferred to new establishment Employee can not withdraw pension fund . To obtain scheme certificate  to be surrendered to the new employer to protect past service for pension purpose 1)Form 13 for transfer if both the establishment are located in the same region or Form 13-A, if located in different regions

2) From-C for scheme Certificate

4 Employee puts in 10 years or more of service and attains the age of 50 years or more at the time of leaving a covered establishment & joining an exempted establishment whether within a period of two months or beyond it Can be withdrawn – but can also be transferred to new employer. Employee can not withdraw pension fund . To obtain scheme certificate  to be surrendered to protect past service for pension purpose, if he joins a covered establishment latter  or can claim reduced pension 1)Form 13 for transfer if both the establishment are located in the same region or Form 13-A, if located in different regions

2) Form-C for scheme Certificate

3) Form 10-D for reduced pension.

5 Employee leaves an exempted establishment and joins a covered establishment He can withdraw pension as per the pension rules of the exempted establishment or alternatively, can get his P.F amount transferred from the previous employer to the new employer(present employer) Not applicable 1)Form 13 for transfer if both the establishment are located in the same region or Form 13-A, if located in different regions

 

For transferring his fund to the new employer, the employee has to fill in Form. 13, if the new employer is located in the same region of P.F office in which his previous employer is also located and Form-13-A, if the new employer is located in a different region and submit it to the new employer (present employer) who will forward it to the  relevant Provident Fund Office which will then take necessary steps to effect the transfer of the P.F amount of the employee to his P.F account under the new employer. The signature of the previous employer is not necessary on Form -13 or Form -13-A.

a)Procedure for transfer of Provident fund

For transferring his fund to the new employer, the employee has to fill in Form. 13, if the new employer is located in the same region of P.F office in which his previous employer is also located and Form-13-A, if the new employer is located in a different region and submit it to the new employer (present employer) who will forward it to the  relevant Provident Fund Office which will then take necessary steps departmentally to effect the transfer of the P.F amount of the employee to his P.F account under the new employer. The signature of the previous employer is not necessary on Form -13 or Form -13-A.

b)Procedure for withdrawal of Provident Fund

The employee shall fill in Form 19 and submit it to the previous employer to enable him to fill in details of contribution etc and forward it to the Regional Office of the Provident Fund under whose jurisdiction, the previous employer falls. The P.F Department shall settle it within 30 days of receipt of the application for withdrawal.

 c)Procedure for withdrawal of pension contributions or obtaining Scheme certificate

The employee can fill in Form 10-C and fill up the relevant column for indicating his option either for withdrawal of pension fund or obtaining Scheme Certificate under Pension Scheme as per his eligibility  and submit it to the Commissioner of Provident fund.

 d)Procedure for claiming  pension

 The employee has to fill in Form-D and send it to the previous employer to enable him to fill in the details by him and attest it and re-transmit it to P.F office concerned for disbursing the appropriate pension.

Important precautions to be taken while filling the forms

1)      Employee to ensure that his signature matches that on the P.F. Dept.’s record.

2)      Fill details correctly such as date of leaving ,P.F code number or bank account number and address etc.

3)      Employee to take the attestation/signature of the employer

PF is a retiral benifit which keeps accumulating and can be utilized for a specific event requiring lump-sum amount or can be encashed in time of need. Contributions to PF are tax deductible within the prescribed limits. This, coupled with the fact that PF accounts earn reasonable interest, PF is a an excellent tool to build a corpus.

…………………………………………………………………………………………………………………………………………………………………….

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc

%d bloggers like this: