GRATUTITY ACT An Act To Provide For A Scheme For The Payment of Gratuity To

GRATUTITY ACT An Act to provide for a scheme for the payment of gratuity to
employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops
or other establishments and for matters connected therewith or incidental thereto.
The Payment of Gratuity Act, 1972
Employers pay gratuity as a reward for long, continuous and meritorious service
Gratuity - by their length of service, employees are entitled to claim a certain amount
as a retiral benefit
With a view to ensure a uniform pattern of the payment of gratuity
Act extends to whole of India, except the State of Jammu and Kashmir.
It applies to
Every factory, mine, oilfield, plantation, port and railway company ;
Every shops and establishments: in which 10 or more persons are employed or were
employed on any day of preceding 12 months.
Such other establishments , in which 10 or more employees are employed, or were
employed, on any day of the preceding twelve months, as the Central Government by
notification, specify in this behalf.
Superannuation:
Attainment of age as is fixed in
a. The contract or
b. Conditions of service, as the age on the attainment of which the employee shall vacate
the employment
Retirement:
Termination of service of an employee otherwise than on superannuation
Continuous service for year:
- Uninterrupted service and includes
- Service interrupted by
a. Sickness
b. Accident
c. Leave
d. Lay off
e. Strike or
f. Lockout or
g. Cessation of work not due to the fault of the employee concerned
Circumstances in which Gratuity becomes payable to an employee:
- On termination of his employment
- After he has rendered continuous service
- Not less than 5 years
- On his superannuation
- On his retirement
- On his resignation or
- On his death or
- Disablement due to accident or diseases
- In case of death of an employee Gratuity shall be paid to his legal heirs
Concept of gratuity is different from concept of retrenchment. ( decided by Supreme
court in State of Panjab v Labour court, Jullundur. Payment of Gratuity does not apply
to a person on retrenchment.
- In case of a piece rated employee:
- Avg. wages/26 X 15 X no. of years of service completed.
- Daily wages = avg. of total wages received by the employee for a period of three
months immediately preceding the termination of his employment.
- Seasonal establishment: @ 7 days wages for each season
Forfeiture of Gratuity: may be forfeited partly or wholly
1. Partial Forfeiture: the gratuity of an employee whose services are terminated for
- Any act or omission or negligence
- causing any damage or loss to or
- Destruction of property belonging to the employer
shall be forfeited to the extent of the damage or loss so caused.
2. Full Forfeiture: the gratuity of an employee whose services are terminated for
a. If the service of an employee is terminated for his
i. Riotous or
ii. Disorderly behavior or
iii. Any other act of violence on his part or
Compulsory Insurance:
- Every employer shall obtain an insurance in the manner prescribed for his liability for
payment towards the gratuity from LIC
- Non payment of Insurance premium fine up to Rs. 10,000
Procedure for claiming Gratuity:
- Application in writing within 30 days from the date of Gratuity payable
- If date of retirement/ superannuation is known employee may apply to employer 30
days before such date
- In case of delay sufficient cause of delay
- Employer determines the amount of Gratuity
- Every employee who has completed service of 1 year make nomination within 30
days
- There can be more than 1 nominee
- If employee has family nomination will be made in the favour of family member
- Nomination can be modified after giving notice to an employer
Offences Penalty
1. Failure to make payment by 1. Fine up to Rs. 10000 and Rs.
way of premium for compulsory 1000 for each day during which
insurance or by way of the offence continues.
contribution to an approved 2. Imprisonment up to 6 months or
gratuity fund. fine up to Rs. 10,000 or both
2. Making a false statement or 3. Imprisonment up to one year (
false representation to avoid any min. 3 months) or fine up to Rs.
payment under the act 20,000 (min. Rs. 10000) or both
3. Contravention or non 4. Imprisonment up to 2 years
compliance of any provision of (min. 6 months )or fine up to
the act or the rules. Rs.20,000 (min. Rs. 10000) or
4. Non payment of any gratuity both
payable under the act.

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