Gujarat Labour Department issues clarification on recovery of gratuity amount under the Payment of Gratuity Act
Pursuant to interpretational queries raised, the Labour Department of Gujarat has issued a clarification on Section 8 of the Payment of Gratuity Act 1972 (“Act”) which deals with Recovery of Gratuity.
Background:
The Section prescribes that: In case the amount of gratuity is not paid by an employer within the prescribed time, the employee (claiming gratuity) may make an application to the Controlling Authority, and the Authority shall issue a certificate directing the Collector to recover the amount of gratuity payable. The Collector shall then recover the same along with compound interest thereon (at a certain rate specified by the Central Government) from the date of expiry of prescribed time for payment of gratuity amount due.
Note: The Controlling Authority shall before allowing the Collector to recover the amount, give the employer a reasonable opportunity to show cause for the delay. Further, the interest payable shall not exceed the amount of gratuity payable.
Clarifications provided:
• Under Section 8 of the Act, “that amount” refers to the amount of gratuity which is payable under the Act by the employer to the person entitled thereto but has not been paid by the employer within the prescribed time limit. It is to be noted that the Controlling Authority is required to issue a certificate only with regard to the unpaid amount by the employer to the concerned person;
• It is further clarified that post issuance of such certificate by the Controlling Authority as per Section 8 of the Act, it becomes the duty of the District Collector to recover the said unpaid amount along with the compound interest, at such rates as the Government of India may specify, as arrears of land revenue and to pay the same to the person entitled thereto;
• The Controlling Authority, before issuing the certificate for the Collector to recover the gratuity, give the employer a reasonable opportunity of showing cause against the issue of such certificate;
• The District Collector, while recovering the unpaid amount along with the compound interest, shall ensure that the amount of compound interest does not exceed the amount of gratuity payable under the Act.
