Section 22: Nomination, Application and Payment of Gratuity

Overview

Section 22 of the Code on Social Security, 2020, specifically addresses the crucial aspects of Gratuity – a significant social security benefit payable to employees in recognition of their service. This section details the process for nominating beneficiaries, applying for gratuity, and the employer’s responsibilities regarding its timely payment. It aims to streamline the gratuity claim process and ensure employees receive their due benefits efficiently.

Who is Covered?

• The Code generally applies to all establishments employing 10 or more employees. However, specific gratuity eligibility depends on continuous service.
• Employees who have rendered at least five years of continuous service are generally eligible for gratuity. This requirement may be relaxed in cases of death or disablement. There are no wage limits specified in the Code.

Benefits and Contributions

• Employee Benefit: Gratuity is a lump-sum payment calculated based on the employee’s last drawn salary and years of service. The exact formula is defined elsewhere in the Code (Section 21) and is generally 15 days’ salary for each completed year of service, subject to a maximum limit (which may be notified by the Central Government).
• Contribution Responsibilities: Gratuity is solely funded by the employer. There are no contributions required from the employee or the government. The employer can choose to fund gratuity through a gratuity trust or an insurance policy.

Procedure and Compliance

Here’s a step-by-step breakdown of the process:

1. Nomination: Employees are required to file a nomination form (Form G) in writing, designating their beneficiary(ies) for gratuity. This nomination can be modified at any time.
2. Application for Gratuity: Upon retirement, resignation, death, or disablement, an employee (or their nominee) must submit a claim for gratuity to the employer (Form F).
3. Employer’s Obligations: The employer is obligated to process the gratuity claim and pay the amount within the prescribed timeframe.
4. Payment Timeline: The Code mandates a specific timeframe for gratuity payment. Delay in payment attracts interest penalties.
5. Interest for Delay: If the employer delays payment beyond the stipulated period, they are liable to pay interest on the overdue amount at a rate specified by the Central Government.

Practical Examples

• Example 1: Employee Eligibility – Mr. Sharma worked for a company for 7 years and 6 months. He resigned. Because he completed more than 5 years of continuous service, he is eligible to claim gratuity.
• Example 2: Employer Non-Compliance – Ms. Patel retired from her company. She submitted her gratuity claim, but the employer delayed payment for 3 months. Ms. Patel is entitled to receive interest on the delayed gratuity amount as per the Code.

Disclaimer

This article is for basic understanding of the Code on Social Security, 2020, and specifically Section 22 relating to gratuity. It should not be treated as legal advice. For specific legal guidance, please consult with a qualified legal professional.