Gratuity mandatory

Labour, HR & Safeguarding
1

We are a charity organisation (NPO) working for wildlife conservation that was registered in Tamil Nadu in 2006. We currently have 12 permanent staff and approximately 14 contract employees, however this number may fluctuate frequently. However, some of the contracts will be renewed for longer than a year. There isn’t much distinction between permanent and contract employees. We pay consolidated salaries, and the majority of our income is project-based. We do not have any corpus. We have not had to pay ESI, PF, or Gratuity to date. All permanent employees earn more than ₹25,000 and number less than 20. So we do not have both ESI and PF. According to recent labour rules, we are required to pay gratuity to both permanent and contract employees. However, for the past several years, we have not had enough funds to cover all of our staff. Can we start fresh from this year on? What’s the procedure?

2

Thanks for your query, Latha.

  1. With 12 permanent staff, your establishment is under ESI now and Gratuity already if employee strength was 10+ in past 12 months or earlier. Once covered, the establishment is always covered under ESI, EPF and Gratuity although opt out facility is now provided under Social Security (SS) Code.
  2. The contract employees we understand are employees with fixed term based on project cycle. These will now be called fixed term employees (FTE) under SS code, at par with regular employees on wages and benefits and will be entitled for gratuity for continuous service for one year.
  3. Please break down consolidated salary into components of compensation as per new definition of Wages such that the Wages (inclusion) constitute 50% of total remuneration. Social security benefits will be applicable accordingly based on comp structure i.e. ESI, Gratuity.
  4. Gratuity liability has to be mandatorily insured i.e. organization will need to take group gratuity policy from an insurance company now under SS Code.

Hope we have answered your queries. The decision on what to consider and follow may be taken based on points mentioned above. To design a comp structure and redo all contract afresh is a call that you will need to consider and take.

CS Sharad Bhargava