Welcome

Presentation on

Gratuity Funds for Workers in

Private Sector’s Establishments

TOPICS TO BE COVERED  

1. Introduction2. Scope3. Steps of PF establishment4. Applicability of Fund 5. Establishment criteria6. Administration and Management of

the Fund 7. Eligibility of the Fund 8. Not eligibility of the Fund 9. Gratuity calculation10.Investment Scope

11. Recognition Merits 12. Non-Recognition demerits13. Audit of the accounts of the

Fund 14. Expenses for maintenance,

Audit and Accounts of the Fund 15.Works to be performed after

formation16.Points to be covered in

preparation of deed and rules of the fund

TOPICS TO BE COVERED

1. INTRODUCTIONGRATUITY IS A PART OF SALARY THAT IS RECEIVED BY AN EMPLOYEE FROM HIS/HER EMPLOYER IN GRATITUDE FOR THE SERVICES OFFERED BY THE EMPLOYEE IN THE COMPANY.GRATUITY IS A DEFINED BENEFIT PLAN AND IS ONE OF THE MANY RETIREMENT BENEFITS OFFERED BY THE EMPLOYER TO THE EMPLOYEE UPON LEAVING HIS JOB. GRATUITY IS A SCHEME TO MOTIVATE PEOPLE TO SERVE FOR LONGER DURATIONS WITH THE SAME EMPLOYER.

2. SCOPE:The following Act, Law, Ordinance & Rules will applicable for the Fund:  Bangladesh Labor Law, 2006 Income Tax ordinance, 1984 Income Tax Rules, 1984 Companies Act, 1994 Trusts Act, 1882 Securities Act, 1920.

3. STEPS OF PF ESTABLISHMENT:

Resolution of the Board of directors;

Selection of the name of the fund; Selection of the Board of Trustees

and other provisions for preparing Rules of the funds;

Drafting deed and rules of the fund;

Notarization of deed and rules of the fund;

Apply for recognition form NBR

4. APPLICABILITY OF FUND (BANGLADESH LABOR LAW, 2006 SECTION 264):

Gratuity shall be, under Bangladesh labor Code 2006, in addition to any compensation for termination or salary given in lieu of notice to any employee.  However, there is no precise and mandatory provisions regarding gratuity Fund or Scheme; Although the Labor Code contains some indications to the payment of gratuity where relevant i.e. Section-  19, 20, 22, 23, 26, 27 and 132 etc. wherein the provisions of payment of gratuity are incorporated.  

4. APPLICABILITY OF FUND (BANGLADESH LABOR LAW,

2006 SECTION 264):To ensure availability of fund to pay off such liability  it is recommended to establish a ‘Gratuity fund’ as practiced by good corporates  in Bangladesh.

5. ESTABLISHMENT CRITERIA:

The Establishment make rules for constitution of provident fund for workers in private sector;

Fund shall be administered by a board of trustees;

6. ADMINISTRATION AND MANAGEMENT OF THE

FUND:There shall be constituted a Board of Trustees. Fund shall be held and administered by a Board of Trustees.Minimum (three) Number of persons nominated by the employer and workers of the company;All members of the board of trustees shall hold office for a period specified by the rules of the fund.

7. ELIGIBILITY OF THE FUND :An employee (in service on the date of commencement of this Fund and thereafter) is eligible to join the fund on completion of one year of service.

Irrespective of the date of commencement of the Fund, the period of service shall be counted from the date of joining in the service of Company.

8. NOT ELIGIBILITY OF THE FUND:

Employees who are dismissed from the service of the Company for cause including but not limited to misconduct, dishonesty, or gross negligence resulting in loss to the Company shall not be eligible.

9. GRATUITY CALCULATION:

A PORTION OF YOUR LAST DRAWN SALARY WOULD BE MULTIPLIED WITH THE NUMBER OF YEARS OF SERVICE AND PAID OUT WHEN LEAVE AN ORGANIZATION AFTER YEARS OF SERVICES.

10. INVESTMENT SCOPE :Investment of the Funds shall be invested on the following securities :

Post Office Saving Bank account ;In promissory notes, debentures,

stock or other securities of the Government;

In stock or debentures of, or shares in, Companies the interest whereon shall have been guaranteed by the Government;

10. INVESTMENT SCOPE :In debenture or other securities for

money issued under the authority of any Bangladesh Act, or on behalf of any municipal body or port trust or city improvement trust; and

On a first mortgage of immovable property situate in Bangladesh.

11. RECOGNITION MERITS:

COMPANY CONTRIBUTION TO THE FUND SHALL BE ALLOWABLE EXPENDITURE AND AVOID PERQUISITE FOR THE PAYMENT TO GF.

EMPLOYEE’S INCOME FROM THE FUND WILL BE EXEMPTED FROM TAX.

INCOME OF THE FUND WILL BE EXEMPTED FROM TAX.

12. NON-RECOGNITION DEMERITS:

COMPANY CONTRIBUTION TO THE FUND SHALL BE TREATED AS PERQUISITE TO THE EMPLOYEE AND IF EXCEED THE LIMIT OF PERQUISITE THAN ADDED TO TOTAL INCOME OF THE COMPANY AS WELL AS ADDITIONAL TAX SHALL BE PAYABLE @ PREVAILING RATE.

13. AUDIT OF THE ACCOUNTS OF THE FUND:The Fund accounts shall be

audited annually by the auditor as per rules of the fund.

The Government may, at its own cost, appoint independent auditor for a special audit of the Fund.

14. EXPENSES FOR MAINTENANCE, AUDIT AND ACCOUNTS OF THE

FUND:The Cost of the audit and accounts of

the shall borne by the company as the accounts of the company are audited as per rules of the fund.

The Government will bear the cost of audit if they appoint independent auditor for a special audit of the Fund.

The cost of maintenance of the fund shall be borne by the employer.

15. WORKS TO BE PERFORMED AFTER FORMATION OF PF:

Apply for Recognition from NBR;

Open Separate Bank account for the funds;

Made proper investment as prescribed;

Maintain individual ledgers and trial balance;

15. WORKS TO BE PERFORMED AFTER FORMATION OF PF:

Preparation of Financial Statements of the Fund; and

Conduction of Audit by Practicing Chartered Accountants.

16. POINTS TO BE COVERED IN PREPARATION

OF DEED AND RULES OF THE FUND:

T R U S T D E E D C R E AT I O N O F T H E G RAT U I T Y F U N D C O M P O N E N T O F T H E G RAT U I T Y F U N D A P P O I N T M E N T A N D F U N C T I O N S O F

T R U S T E E S N U M B E R O F T R U S T E E S C E S S AT I O N , D I S Q U A L I F I C AT I O N ,

R E M OVA L O F T R U S T E E S , A N D A P P O I N T M E N T O F T R U S T E E S I N A VAC A N CY

16. POINTS TO BE COVERED IN PREPARATION OF DEED AND RULES OF THE FUND:

T R U S T D E E D P R O P E RT Y O F T H E F U N D D E E M E D T O

B E T RA N S F E R R E D T O T H E N E W T R U S T E E S

L I A B I L I T I E S A N D I N D E M N I F I C AT I O N O F T R U S T E E S

R E M U N E RAT I O N O F T R U S T E E S T R U S T I R R E VO C A B L E C LO S I N G A N D W I N D I N G U P O F T H E

F U N D S R U L E S O F T H E F U N D A LT E RAT I O N O F R U L E S

16. POINTS TO BE COVERED IN PREPARATION OF DEED AND

RULES OF THE FUND:T R U S T R U L E S N A M E O F T H E F U N D DAT E O F C O M M E N C E M E N T O B J E C T S D E F I N I T I O N S E L I G I B I L I T Y B E N E F I T B A S I S G RAT U I T Y PAY M E N T N O R M A L R E T I R E M E N T L AT E R E T I R E M E N T

16. POINTS TO BE COVERED IN PREPARATION OF DEED AND RULES

OF THE FUND:T R U S T R U L E S L E AV I N G O F E M P LOY M E N T D E AT H I N S E RV I C E E X PAT R I AT E E M P LOY E E S G RAT U I T Y I N C R E A S E S BOA R D O F T R U S T E E S A U D I T AC C O U N T S F U N D I N G P O W E R T O A LT E R R U L E S W I N D I N G U P O F T H E F U N D R E S O LU T I O N O F D I S P U T E S

Thank you