This presentation covers the topic of gratuity funds for workers in private sector establishments in Bangladesh. It discusses what gratuity is, the scope and applicability of gratuity funds, the criteria for establishing funds, how funds are administered and managed, eligibility rules, how gratuity is calculated, investment of funds, tax benefits of recognized funds, audit requirements, and key points to include in the deed and rules for setting up a fund. The document provides an overview of the legal framework and processes for setting up and managing gratuity funds in Bangladesh according to the country's labor laws.

1. Welcome

2. Presentation on
Gratuity Funds
for Workers in Private
Sector’s Establishments

3. TOPICS TO BE COVERED
1. Introduction
2. Scope
3. Steps of PF establishment
4. Applicability of Fund
5. Establishment criteria
6. Administration and Management of the Fund
7. Eligibility of the Fund
8. Not eligibility of the Fund
9. Gratuity calculation
10.Investment Scope

4. 11. Recognition Merits
12. Non-Recognition demerits
13. Audit of the accounts of the Fund
14. Expenses for maintenance, Audit
and Accounts of the Fund
15.Works to be performed after formation
16.Points to be covered in preparation of deed
and rules of the fund
TOPICS TO BE COVERED

5. 1. INTRODUCTION
GRATUITY 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.

6. 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.

7. 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

8. 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.

9. 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.

10. 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;

11. 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.

12. 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.

13. 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.

14. 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.

15. 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;

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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;

22. 15. WORKS TO BE PERFORMED
AFTER FORMATION OF PF:
Preparation of Financial Statements of the
Fund; and
Conduction of Audit by Practicing Chartered
Accountants.

23. 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 R AT U I T Y F U N D
 C O M P O N E N T O F T H E G R AT 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 O VA 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
VA C A N C Y

24. 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 TO
B E T R A N S F E R R E D TO 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 R AT I O N O F T R U S T E E S
 T R U S T I R R E V O C A B L E
 C L O 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

25. 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
 D AT 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 R AT 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

26. 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 L O Y 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 L O Y E E S
 G R AT U I T Y I N C R E A S E S
 B O A R D O F T R U S T E E S
 A U D I T
 A C C O U N T S
 F U N D I N G
 P O W E R TO 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 L U T I O N O F D I S P U T E S

27. Thank you