THE PAYMENT OF GRATUITY ACT, 1972

GRATUITY:

 Gratuity, as the term itself suggests is a gratuitous payment given to an employee.  It is a benefit payable by the employer to his employee upon his retirement or on the termination of his employment.

PAYMENT OF GRATUITY ACT, 1972 :

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 .

SHORT TITLE AND EXTENT:

 This Act may be called the PAYMENT OF GRAUITY ACT, 1972.  It extends to the whole of india: provided that it shall not extend to the State of J&K.

APPLICATION OF THE ACT :[SECTION 1(3)]

(a) every factory, mine, oilfield, plantation, port and railway company; (b) every shop or establishment within the meaning of any law in which ten or more persons are employed, or were employed, on any day of the preceding twelve months; (c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

DEFINITIONS DEFINED UNDER THE ACT, 1972

APPROPRIATE GOVERNMENT: [SECTION 2(a)]

(i) In relation to an establishemnt(a) Belonging to, or under the control of, the Central Government (b) Having branches in more than one state ( c ) a factory belonging to, or under the control of, the Central Government (ii) In any other case, the State Government;

EMPLOYER :[SECTION 2(f)]

(i) Belonging to, or under the control of the Central Government or a State Government, a person or authority appointed by the appropriate government for the supervision and control of employees, or where no person or authority has been appointed, the head of the Ministry or the department concerned. (ii) Belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been appointed, the chief executive office of the local authority.

EMPLOYEE :[SECTION 2(e)]

i. Employee any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are expressed or implied and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.

WAGES :[SECTION 2(s)]

i. Wages means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance BUT DOES NOT INCLUDE any bonus, commission, house rent allowance, overtime wages and any other allowance

RETIREMENT [SECTION 2(q)]

i. RETIRMENT means termination of the service of an

employee otherwise than on superannuation.

SUPERANNUATION [SECTION 2(r)]

i. SUPERANNUATION in realtion to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service as the age on the attainment of which the employee shall vacate the employment.

PAYMENT OF GRATUITY [SECTION 4]

WHO IS ELIGIBLE FOR GRATUITY AND WHEN? OR PAYMENT OF GRATUITY: (SECTION 4)

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,(a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement(five year service not required) due to accident or disease.

WHO SHOULD GET IF EMPLOYEE DIES? : [SECTION 4(1)]

In the case of death of the employee, gratuity payable to him shall be paid to i. ii. his nominee or, if no nomination has been made, to his heirs

where any such nominees or heirs is a minor, the share of such minor shall be deposited with the controlling authority (i.e. government officer) who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

AMOUNT OF GRATUITY- HOW MUCH? : [SECTION 4(2) AND 4(3)]

i. For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned . ii. The amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees.

RATE AT WHICH GRATUITY IS PAID [SECTION 4(2)]:

i. In the case of a piece rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account (in a piece rated system there may not be the concept of basic, DA, HRA, CCA etc.) ii. In the case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days wages for each season .

HOW TO CALCULATE GRATUITY EQUAL TO 15 DAYS WAGES? :

i. In the case of a monthly rated employee, the fifteen days wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen Example Monthly wages Rs. 13000 Divide it by 26 = the quotient you got is Rs. 500 Multiply Rs.500 (quotient) x 15 days = Rs.7500 (i.e. the gratuity payable for each completed year of service or part in excess of six months thereof).

MAXIMUM LIMIT ON GRATUITY : [SECTION4(3)]

i. The amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees (Rs.350,000) If there is an award, agreement or contract For higher amount of gratuity It is allowed.

GRATUITY TO DISABLED EMPLOYEES :

i. Gratuity to disabled employees computing the gratuity payable to an employee who is re-employed, after his disablement, on reduced wages, his wages for the period preceding his disablement, shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.

FORFEITURE OF GRATUITY : [SECTION 4(6)]

a) An employee, whose services have been terminated for any act, willful 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; b) the gratuity payable to an employee may be wholly or partially forfeited (i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or (ii) If the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment

NOMINATION [SECTION 6]

NOMINATION : [SECTION 6]
i. Employee has the right to change the nomination in accordance with the provisions of this Act. ii. If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make a fresh nomination. iii. Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by the employee to his employer, who shall keep the same in his safe custody.

PROCEDURE FOR THE PAYMENT OF GRATUITY [SECTION 7]

PROCEDURE FOR THE PAYMENT OF GRATUITY [SECTION 7]: APPLICATION BY THE EMPLOYEE [SECTION 7(1)]:
i. A person who is eligible for payment of gratuity under this act , in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.

EMPLOYER TO DETERMINE THE AMOUNT OF GRATUITY[SECTION 7(2)]

i. As soon as gratuity becomes payable, the employer shall, whether an application has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controllling authority specifying the amount of gratuity so determined.

EMPLOYER TO PAY GRATUITY WITHIN 30 DAYS ON WHICH IT BECOMES PAYABLE [SECTION 7(3)]
i. The employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable to the person to whom the gratuity is payable.

DEPOSIT OF GRATUITY WITH THE CONTROLLING AUTHORITY IN CASE OF DISPUTE [SECTION 7(4)]
The employer deposits the amount of gratuity with the controlling authority if there is any dispute; i. ii. As to the amount of gratuity payable to an employee under this act As to the admissibility of any claim of or in the relation to an employee for payment of gratuity iii. As to the person entitled to receive the gratuity.

CONTROLLING AUTHORITY

CONTROLLING AUTHORITY [SECTION(3)]:

a) Controlling authority is appointed by the appropriate government by notification in the official gazette.

POWERS OF CONTROLLING AUTHORITY : [SECTION 7(5)]

The controlling authority shall have the powers under the Code of Civil Procedure, 1908 in respect of the following matters, namely (a) enforcing the attendance of any person or examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) issuing commissions for the examination of witnesses.

APPEALS

APPEAL AGAINST THE ORDER OF CONTROLLING AUTHORITY : [SECTION 7(7)]

i. Appeal if any shall be made within 60 days form the date of the order Appeal by employer will not be admitted unless the disputed amount is deposited appellate authority, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority .

INSPECTORS

INSPECTORS [SECTION 7A]

1) The appropriate government may, by notification, appoint as many Inspector, asit deems fit, for the purpose of this Act. 2) The appropriate government may, by gerneral or special order, define the area to which the authority of an inspector so appointed shall extend and where two or more inspectors are appointed for the same areas,also provide, by such order, for the distribution or allocation of work to be performed by them under this Act. 3) Every inspector shall be deemed to be public servant within the meaning of Section 21 of the IPC (45 of 1860).

POWERS OF INSPECTORS[SECTION 7B]

a) require an employer to furnish such information as he maconsider necessary b) May examine the employer or any employee make copies of, or take extracts from, any register, record, notice or other document, as he may consider relevant search and seize, such register, record, notice or other document as he may consider relevant in respect of any offence persons required to produce any register, record, notice or other document or to give any information are duty bound to do so under section 175 and 176 of the Indian Penal Code 1860. Exercise any other power prescribed by the state section 94 of Code of Criminal Procedure, 1973 shall apply to search and seize.

RECOVERY OF GRATUITY : [SECTION 8]

i. If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon as arrears of land revenue and pay the same to the person entitled. ii. Controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate: Amount of interest shall not be more than the amount of gratuity payable .

PENALTIES

PENALTIES [SECTION 9]
i. Imprisonment for a term which shall not be less than three months, but which may extend to one year ii. With fine which shall not be less than 10,000/- but which may extend to 20,000/- or both.

EXEMPTION OF EMPLOYER

EXEMPTION OF EMPLOYER FROM LIABLITY IN CERTAIN CASES (SECTION 10):

a) If he proves that the actual offender is some other person. b) He has also proved that the said other person committed the offence in question without his knowledge,consent or connivance before the court.