1. What are the consequences for Delayed Gratuity?

If an employer fails to pay gratuity within 30 days from the date it becomes payable (such as on retirement, resignation, or death), the following consequences apply under the Payment of Gratuity Act, 1972:

• Interest Penalty: The employer must pay simple interest on the delayed amount, calculated from the date the gratuity became payable until the date it is actually paid. The interest rate is notified by the Central Government and is subject to change. As of recent rulings, courts have ordered interest rates as high as 10% per annum for delayed payments.

• Legal Action: The employee can file a complaint with the controlling authority, who can order the employer to pay both the due gratuity and the applicable interest. Persistent non-payment may lead to further legal recourse, including recovery of the amount as arrears of land revenue.

• Additional Penalties: Failure to comply with orders may result in fines and, in some situations, imprisonment for the employer according to Section 9 of the Act. Penalties can include a minimum of 3 months’ imprisonment (which may extend to 1 year) or fines ranging from ₹10,000–₹20,000.

• Reputational Damage: Besides legal penalties, organizations delaying gratuity payments may suffer reputational harm, affecting their ability to attract and retain talent.

Note: The requirement to pay interest does not apply if the delay is due to the employee’s fault and the employer has obtained permission from the controlling authority.

In summary, delayed payment of gratuity not only incurs financial penalties but can also result in serious legal and reputational consequences for employers. Ensuring timely gratuity payments is essential for compliance and good employer-employee relations.

2. Whether a principal employer need to file both Form U under S&E and Form XXV under CLRA?

yes, a principal employer is generally required to file both Form U under the Shops and Establishments (S&E) Act and Form XXV under the Contract Labour (Regulation & Abolition) Act (CLRA), but these forms serve distinct purposes and apply under different circumstances.

↔ Form U under Shops & Establishments Act

• This is an annual return required to be filed by establishments registered under the Shops and Commercial Establishments Act (such as in Karnataka).

• Form U includes details about the establishment’s registration, employment particulars, such as number of employees employed directly, leaves given, and welfare provisions.

• The return consolidates data about employees working and separated and covers statutory compliance under the Shops Act.

• In some states like Karnataka, filing Form U is mandatory every year, typically by mid-January or the prescribed deadline.

• Filing Form U is required irrespective of whether contract labour is employed or not, as a record of the establishment’s employment status and benefits.

↔ Form XXV under Contract Labour (Regulation & Abolition) Act

• Form XXV is the annual return of the principal employer under the CLRA and must be submitted to the Registering Officer.

• It provides detailed information on contract labour employed by the establishment, including the number of days contract labourers were employed, man-days worked, security deposits, and contracts with agencies.

• It is mandatory for all principal employers who engage contract labourers in their establishments.

• The annual return must be submitted by February 15 (or the specified date) for the preceding year ending December 31.

• This form focuses exclusively on compliance related to contract labour and labour regulations under CLRA.

↔ Summary Comparison

• Form Applicable Law Purpose Filing Frequency When Required
• Form U Shops & Commercial Establishments Act Reporting general establishment details, employee info, welfare Annual All registered establishments
• Form XXV Contract Labour (Regulation & Abolition) Act Reporting contract labour employment details, compliance Annual When contract labour is engaged

↔ Key Points

• A principal employer who has contract labourers must file both forms to remain compliant — Form U for general labour/statutory compliance under S&E, and Form XXV for contract labour details under CLRA.

• Some states may allow consolidated or online filing portals for ease, but legally both returns remain mandatory within their respective frameworks.

• Non-filing or delayed filing of either return may result in penalties and legal notices from labour authorities.