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Payment of gratuity act 1972
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Payment of gratuity act 1972

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an brief of Gratuity Act

an brief of Gratuity Act


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  • 1. • Latin word – Gratuitous• Gratuity means a lump sum payment made by anemployer as the retrial reward for his past service whenhis employment is terminated
  • 2.  Retiring benefit-Long and Unblemishedservice
  • 3. except Shop and establishment covered under SHOPS ANDESTABLISHMENT ACT- 10 or more persons - immediatelypreceding to 12 months. Once this act applies – continue to be governed –irrespective of no of persons It shall come into force on such date as the central governmentmay by notification , appoint
  • 4.  Employee does not include- holds post under centralor state government Teacher cannot be called as employee due to amendmentof this act
  • 5.  Continuous Service” means uninterrupted servicewhich may be interrupted on account of sickness ,accident , leave , absence from duty without leave(notbeing treated as break in service),lay-off , strike , lock-out or cessation of work not due to the fault of theemployee. Whether such uninterrupted or interrupted servicewas rendered before or after the commencement of theAct
  • 6.  If an employee is not in continuous service within the meaningof CLASS-1 he shall deemed to be in continuous service. For a period of 1 year :  190 Days, if the employee was employed below the ground in a mine  190 Days ,if the employee was employed in an establishment which works for less than 6 days in a week  240 Days, in any other case
  • 7. For a period of 6 months :  95 Days , if the employee was employed below the ground in a mine  95 Days , If the employee was employed in an establishment which works for less than 6 days in a week  120 Days , In any other case
  • 8. Gratuity is payable when there is :-  Continuous service of 5 yrs(not necessary incase of death or disablement)  Incase of death ,the amount shall be paid to nominee or legal heir  Time limit- Within 30 days of gratuity becoming payable  Maximum Amount-The gratuity payable to an employee shall not exceed Rs. 10,00,000
  • 9.  It is mandatory where number of employees is morethan 500 The registration shall be done in prescribed time & inprescribed manner The insurance shall be taken from LIC or any otherprescribed insurance company However , employer of an establishment belonging toor under the control of CG or SG are exempted from theoperations of sec.4A.
  • 10.  Every employee, who has completed 1 yr of service , is compulsorily required to make a nomination (Form F) The nomination must be made within 30 days
  • 11. The nomination must be made in favor of one ormore members of the family(nomination shall be voidif it is made in favor of a person who is not a memberof his family)If at the time of making nomination, the employeedoes not have family, the nomination may be made infavor of any personThe employee may distribute the amount of gratuityamongst more than one nominee
  • 12.  Application can be made by :- • An employee who is eligible for payment of gratuity • Any person authorized in writing by such employee • Nominee of the employee(if the deceased employee had made a nomination) • Legal heir of the employee(if the deceased employee had not made any nomination)
  • 13.  If the employer fails to pay the gratuity within the prescribed time (i.e., within 30 days of termination of employment) , the controlling authority is empowered to issue a certificate to the collector to recover the amount of Gratuity The employer shall also be liable to pay Compound interestat such rate as may be notified by CG from time to time The interest shall be paid from the date of expiry of the prescribedperiod& ending with actual date of payment of Gratuity The interest payable shall not exceed the amount of gratuitypayable
  • 14. OFFENCE PENALTYFalse statement to 6 months imprisonment oravoid payment Rs 10,000 or both 3 months-1 yrDefault in complying imprisonment or Rs 20,000with Act or bothNon-payment of 6 months-2 yrsGratuity imprisonment
  • 15.  Monthly Rated Employee Piece rated employee Employee of a Seasonal Establishment
  • 16. • Last drawn wages x 15/26 x Completed years of Service(incl. a part of year in excess of 6 months) NOTE:• Wages = Last drawn• Month = Period of 26 Days• 15 days wages = Last drawn wages x 15/26
  • 17. • Last drawn wages x 15/26 x Completed years of Service(incl. a part of year in excess of 6 months)NOTE:• Last drawn wages = Total wages received during 3 monthsimmediately preceding termination/Days actually worked• Last drawn wages shall not include overtime wages
  • 18. • Such an employee shall be paid gratuity at therate of 7 days wages for each season