Workers eligible for interest on gratuity, rules Madurai Bench of HC

Workers eligible for interest on gratuity, rules Madurai Bench of HC

An employee becomes eligible for gratuity on the termination of his employment after he has rendered continuous service for not less than five years, according to Section 4(1) of the Payment of Gratuity Act, 1972.

He is also entitled for interest on the gratuity in terms of Section 7(3) and 7(3A). Making these clear, the Madurai Bench of the Madras High Court directed the Arumuganeri Salt Workers Co-operative Production and Sale Society Ltd, Thoothukkudi district, to pay the amount to its worker, Mr A. Rajan, within 30 days from date of receipt of a copy of this order without further driving him to any other forum.

Mr Justice K. Chandru, hearing a writ petition from the Society challenging the order dated January 27, 2009 of the Appellate Authority under the Act, Madurai (R-2), directing it to make interest payment if gratuity was not paid within 30 days from the date of his order, noted that from the beginning, it was the stand of the petitioner Society that R-1 (Mr A. Rajan) was not eligible for gratuity. If Sections 7(3) and 7(3A) were read together, then there was no difficulty in understanding the eligibility for receiving interest. In the present case, the Appellate Authority had correctly construed the legal provisions and there was no case made out to interfere with the interpretation placed by the Authority.

The petitioner contended that payment of interest would arise only when there was delayed payment, and in this case, there was no delay since they had paid gratuity as ordered by R-2, and hence the question of payment of interest would not arise. This Court was unable to accept the said statement, since the entire controversy was with regard to the legal provision.

Reading Section 4(1) of the Act it would be clear that the date relevant for determination of interest was the date on which gratuity became payable, which in the present case was when R-1 resigned his job on 1-6-2003. When R-1 issued notice for payment of gratuity, petitioner employer did not honour the notice. On the contrary, it was only when R-1 instituted a claim before the Controlling Authority, the petitioner contended about the irregular nature of his employment and his alleged disqualification from receiving gratuity.

In the light of these, the writ petition stood dismissed, the Judge held.

Source: The Hindu

Central Government Employees General Insurance Scheme - CGEGIS

One of the oldest scheme for Central Government Employees, and let we see how to calculate the Insurance amount...

Central Government Employees General Insurance Scheme - CGEGIS
Retirement Benefits : Terminal Benefits

CGEGIS scheme provides for the CG Employees the two benefit viz.
1. Insurance cover
2. Lumpsum Payment

A portion of monthly contributions paid while in service is credited in a Saving Fund, on which interest accrues. A Government servant while entering service has to apply in Form No. 4 of the above Scheme to the Head of Office, who shall issue a sanction for the payment of subscriber’s accumulation in the Savings Fund segment together with interest and arrange for its disbursement, soon after retirement. Payments under this Scheme are made in accordance with the Table of Benefit which takes in to account interest up to the date of cessation of service. Insurance cover benefit under this Scheme is available to the family in the event of death of the subscriber. No interest is payable on account of delayed payments under this Scheme.

The scheme, which is compulsory to all Central Government Employees, provides at a low cost and on contributory and self-financing basis, the twin benefits of an insurance cover to help their families in the event of death in service and a lumpsum payment to augment their resources on retirement.

Insurance & Savings Fund:-
A portion (30%) of the subscribing is credited to the Insurance Fund and the other portion (70%) to the saving find which earns interest at eh prescribed rate compounded quarterly.

Membership :-
Employees are enrolled as members of the scheme only from 1st January every year. From the actual date of appointment to 31st December of that year, he will be entitled only to Insurance cover.

Monthly Subscription & Amount of Insurance cover :-
 (X) : Applicable to all employees who were members of the scheme on 31/01/1989 and have opted to continue to subscribe at eh old rates.

 (Y) : Applicable to all employees who were members of the scheme on 31/01/1989 and have opted to subscribe at the revised rates with effect from 01/01/1990 and to those who joined service on or after 01/02/1989.

 Group to which the employee belongs will be determined with reference to the post held by him on a regular basis on the 1st January.

 On regular promotion of a member to a higher Group after the 1st January in any year, his subscription will be raised only from the 1st January of the next year. Once an employee is admitted to the higher group, his subscription and Insurance cover will continue to be at the same rate, even if he is subsequently reverted to the lower group for any reasons.

 Subscription is payable till the end of service including the month in which an employee retires, dies, resigns, or is removed from service.

Benefits Payable :-
Retirement, resignation, etc., : The employee will be paid as per the Table of benefits.

Lumpsum due to him out of the Savings Fund for entire period of membership in the lowest group.

Amount due to him for the additional units by which subscription was raised due to promotion – for the period from which the rate was raised, to the date of cessation of membership.

Death while in service : The nomination / heir will be paid.

The amount of appropriate Insurance Cover to which the employee was entitled at the time of death.

Lumpsum and amount as in the case of (a) above, for the period till the date of death.

Only the Insurance Cover, if death takes place before becoming a member.

Nomination :-
If the employee has a ‘family’, he shall make such nomination only in fovour of a member or members of his ‘family’. However, a female subscriber can exclude her husband from her family for the purpose of this scheme by a notice in writing to the Head of Office.

‘Family’ means husband, wife or wives, parents, children, a ward, minor brothers, unmarried sisters, deceased son’s widow and children and where none of the parents of the members of the scheme is alive, a paternal grandparent. If any of the nominated members of the family subsequently ceases to be the member of the family under any circumstances, nomination made members of the family in equal shares.

In absence of valid nominations under the scheme, nomination made under CPF/GPF, the amount will be paid in equal shares to the widow/widows, minor sons and unmarried daughters.

In case of absence of any eligible member of the family, the payment may be made to other legal heirs on production of succession certificate issued by a competent Court of Law.

Debarring an eligible person from receiving Insurance amount :-
If a person who, in the event of death of a Government servant while in service, is eligible to receive the insurance amount, is charged with the offence of murdering the Government servant or for abetting in the commission of such an offence, his/her claim to receive insurance amount will be suspended till the conclusion of the criminal proceedings. On the conclusion, the person, if convicted, will be debarred from receiving the share of insurance amounts, which will be paid in equal shares to other eligible persons.

Other Points :
Recovery of Government does not permissible

Eligible for Income Tax exemption

No withdrawal / Loans / Advances are permissible

Member can be permitted by HOD to assign the insurance cover and accumulation in the savings find in favour of a recognized Finance Institutions as security for obtaining loans for construction / purchase of house / flat.

Illustation :-
An employee joined the scheme with effect from 1.1.1982
Retiring on superannuation on 31.12.2007

Entitlement of the employee, If he was a Group ‘D’ employee throughout :
When continued to subscribe at the old rate :
Amount as per table for cessation on 31.12.2007 = Rs. 11,515
When subscribed at the old rates up to 31.12.1989
and at eh new rate from 1.1.1990 = Rs. 13,646

Entitlement of the employee, If he was a Group ‘D’ employee 31.12.1986
And a Group ‘C’ employee from 1.1.1987:
When continued to subscribe at the old rate :
Amount as per table for cessation on 31.12.2007
For a monthly subscription of Rs.10 = Rs. 11,515

Amount as per table for cessation on 31.12.2007
For a additional monthly subscription of
Rs.10 (20-10) from 1.1.1987 = Rs. 6,276

Total = Rs.17,791

When subscribed at the old rate up to 31.12.1989
And at the new rate from 1.1.1990 :

Amount as per table for cessation on 31.12.2007
For a monthly subscription of Rs.10/15 : = Rs.13,646

Amount as per table for cessation on 31.12.2007
For an additional monthly subscription of
Rs.10/15 from 1.1.1987 = Rs. 8,409

Total = Rs.22,055

Source: centalgovernmentnews.blogspot.com

New Commutation Table - How to calculate Gratuity and Pension - Terminal Benefits

"For payment of commutation amount the Commission has noted that various factors suggest that the procedure of restoration of commuted amount after 15years appears to be more than fair. However the Commission has recommended the a new table (Annex.5.1.2) for calculation of commutation values."

Age	Factor		Age	Factor		Age	Factor
20	9.188		41	9.075		62	8.093
21	9.187		42	9.059		63	7.982
22	9.186		43	9.040		64	7.862
23	9.185		44	9.019		65	7.731
24	9.184		45	8.996		66	7.591
25	9.183		46	8.971		66	7.431
26	9.182		47	8.943		68	7.262
27	9.180		48	8.913		69	7.083
28	9.178		49	8.881		70	6.897
29	9.176		50	8.846		71	6.703
30	9.173		51	8.808		72	6.502
31	9.169		52	8.768		73	6.296
32	9.164		53	8.724		74	6.085
33	9.159		54	8.678		75	5.872
34	9.152		55	8.627		76	5.657
35	9.145		56	8.572		77	5.443
36	9.136		57	8.512		78	5.229
37	9.126		58	8.446		79	5.018
38	9.116		59	8.371		80	4.812
39	9.103		60	8.287		81	4.611
40	9.090		61	8.194		-	-

(New Commutation Table)

Retirement from Government service, the Government offers various retirement benefits to its employees as a measure of social security for their old age. The quantum of these benefits is dependant upon the factors.

The minimum qualifying service for superannuation pension is 20 years.

The average emoluments of last ten months or the pay last drawn

Ten years shall not be entitled to pension

The minimum pension of Rs.3500

Family pension shall be calculated at a uniform rate of 30%

It may be noted here that, the term ‘Emoluments’ has a different connotation for the calculation of pension and gratuity. For the calculation of pension, ‘Emoluments’ refers to Basic Pay+ Grade Pay. However, for the purpose of the calculation of gratuity the term ‘Emoluments’ includes Dearness allowance as on the date of the retirement of a government servant.

The phrase ‘Qualifying service’ refers to the total duration of service put in by a government servant after reducing any period of non qualifying service such as periods of dies non, suspension specified as non qualifying service or any other period of absence not regularized as leave.

The amounts payable to a government servant upon retirement from service can be classified into 2 categories.

1.Retirement benefits.
2. Other dues.


The first category includes the following:
1.Pension
2.Commutation value of pension.
3.Gratuity


Other dues which become payable upon retirement are:
1.Insurance
2.Leave Encashment
3.GPF balance.


For the timely payment of retirement and other benefits the timely lodging of a claim with the Head of office is a must. Government servants due to retire must submit completed claim forms to their Heads of offices atleast 6 months before their retirement to ensure that all benefits are paid to them timely. The Heads of office process the pension papers as per the rules and forward the same to CCA offices for effecting payment to the retiring official.

Also to avoid any unnecessary payment related complication in the event of the death of a government servant it is essential that all government servants submit a copy of completed nomination forms for GPF, Gratuity and Insurance to their Heads of offices for attaching in their service books. Further, government servants should also verify their service books once annually and see whether all entries pertaining to service verification, insurance and pension contribution, leave etc. have been properly recorded in them. Any discrepancy in these entries should be brought to the knowledge of the Head of office at the earliest.



Calculation of Superannuation pension

The formula for the calculation of superannuation pension is as given below:

50% of the emoluments drawn during the last month

For example:
emoluments drawn during the last month = Rs.12000.00
Dearness Allowance rate on the date of retirement = 16%
Qualifying service = 28 years
Age on retirement = 60 years
Commutation desires = 40%
In the above case pension will be equal to 1/2 x 12000 = Rs. 6000.00


The minimum amount of pension payable is Rs.3500 and the minimum amount of qualifying service entitled for pension is 20 years.



Calculation of Retirement gratuity

Retirement gratuity is admissible to all employees after completion of 5 years of qualifying service. The quantum of gratuity payable is also derived from the emoluments (but here DA on the date of retirement is also included) @ ½ of emoluments for each completed 6 monthly period of qualifying service subject to a maximum of 16 ½ times the emoluments from Rs. 3.5.lacs to raised 10 lakh. Therefore in the above example the amount of gratuity payable would be:
13920 (Pay + DA) x 66/4 = Rs.229680.00.

Gratuity is not payable to retirees against whom disciplinary / vigilance proceedings are pending at the time of retirement, till the conclusion of such proceedings.



Calculation of Commuted Value of pension

As per the CCS (Pension) Rules, the government also gives an opportunity to its employees to commute a part of their pension in return for a lumpsum payment. The maximum percentage of pension which can be commuted under these rules is 40%. Upon the receipt of the lumpsum commuted value of pension, the pensioner draws reduced pension to the extent of the amount commuted, for 15 years. Thereafter, his pension is restored to full. Commuted value of pension is not payable to retirees against whom disciplinary / vigilance proceedings are pending at the time of retirement, till the conclusion of such proceedings.

In the above example the amount of pension admissible for commutation will be calculated in the following manner:
40/100 x 6000 = Rs. 2400

The amount of lumpsum payable in lieu of the commuted amount is determined by means of a Commutation Table (given above) containing the commutation factors. The formula for working out the lumpsum payable is as follows.

Amount offered for Commutation x 12 x Commutation factor.

Therefore in the above case the amount will be equal to 2400x12x8.194 = Rs.2,35,987

The reduction in the amount of pension on commutation will become operative from the date of receipt of the commuted value by the pensioner, or at the end of three months after the issue of authority for payment, whichever is earlier. For the restoration of the commuted value of pension upon completion of 15 years, the pensioner should apply to the pension disbursing authority i.e., Post office / Bank in the



Encashment of Earned leave

The encashment of earned leave at credit at the time of retirement. The amount of leave encashment payable is worked out in the following manner. Emoluments (Pay +GP)/30 x No. of days of EL credit subject to max. 300 days Therefore in the above case the leave encashment payable would be; 13920/30 x 300 = Rs. 139200.00 (For 300 days of earned leave.)



General Provident Fund

The GPF balance at the credit of the employee becomes due for payment at the time of his retirement. GPF subscription is to be compulsorily discontinued during the last 3 months of service on superannuation. The employee should fill up the form for final payment and submit in his office. After processing of the same the form shall be forwarded to the concerned CCA office, which shall make arrangement for the payment of the principal and interest in the GPF account of the subscriber.