THE PAYMENT IF GRATUITY ACT

1. The payment of gratuity act, 1972
 The payment of gratuity act came into effect on 1972
 It extends to the whole of India. It mainly relates to the plantations and ports.
 It is not applicable in the state of Jammu and Kashmir.
 The act mainly provides a scheme for payment of gratuity to employees engaged in:
 Factory, mine, oilfield, plantation, port and Railway Company.
 Every shop or establishment in a state in which 10 or more persons are employed
 According to rule 3 payment of gratuity a specified form should be submitted to the
controlling authority of the area if:
 Any change in the name or the address of the employer or change in the nature of
business
 If any proposal to close down the organization the employer should inform the
controlling authority at least 60 days before planning to close.
Meaning of word “Gratuity”
 The word ‘Gratuity’ has been derived from the word “Gratuitous” which
means ‘Gift’ or ‘Present’.
 It is a lump sum payment made by an employer as the retrial reward for his
past service when his employment is terminated.
DEFINITION :
 Any person employed on wages not exceeding more than 3500/- rupees per
mensem
 Working in any establishments like factory, mine, oilfield, plantations, port,
railway company to do any skilled, semi skilled or unskilled manual, supervisory
or clerical work.

2. Object of the Act
Retiring benefit-Long and Unblemished service
Section 1 Extent and Application
 It extends to the whole of India
 Applicable to:
o every factory, mine, oilfield, plantation, port and railway company;
o every shop or establishment in which 10 or more persons are employed,
or were employed, on any day of the preceding twelve months
o 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.
Wide application. Only condition- 10 or more employees)
if No. of employees reduced!
 Once this Act is applied to a shop or establishment

3.  It shall continue to be governed by this Act
 Even if the number of persons employed gets reduced at a later date.
Section2 Definitions
 "employee" means any person employed to do any skilled, semi-skilled, or
unskilled, manual, supervisory, technical or clerical work
 it does not include an apprentice
 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" includes dearness allowance but does not include any bonus,
commission, house rent allowance, overtime wages and any other allowance.
Section[ 2A] Continuous Service means uninterrupted service which may be
interrupted on account of sickness ,accident , leave , absence from duty without
leave(not being treated as break in service),lay-off, strike , lock-out or cessation of
work not due to the fault of the employee.
Whether such uninterrupted or interrupted service was rendered before or after the
commencement of the Act

4. If an employee is not in continuous service within the meaning of CLASS-1 he shall
deemed to be in continuous service.
For a period of 1 year :
 190Days, 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
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
Section3 Controlling authority
Section 4 Payment of gratuity
Gratuity is payable when there is :-
 Continuous service of 5 yrs (not necessary in case of death or disablement)
 In case 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
CALCULATION OF GRATUITY [Refer spiral copy]

6. Who should get if employee dies?
 in the case of death of the employee
 gratuity payable to him shall be paid to his nominee or,
 if no nomination has been made, to his heirs, and 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.
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 .
Amount of Gratuity-how much?
 For every completed year of service or
 part thereof in excess of six months,

7.  the employer shall pay gratuity toan employee
 at the rate of fifteen days’ wages
 based on the rate of wages last drawn by the employee concerned
How to Compute wages for Gratuity to Piece rated employees?
 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.)
Computationof Gratuity for employees in seasonal employment
 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 gratuityequal to 15 days wages?
 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
Maximum limit on Gratuity
 The amount of gratuity payable to an employee shall not exceed Rs.3,5 0,000
 If there is an award, agreement or contract
 For higher amount of gratuity
 It is allowed.
Employer to initiate calculation and notice of payment
 Any person eligible to receive gratuity shall make an application to the
employer for payment of the same within the prescribed time
 Whether an application is made or not the employer shall determine the
amount payable and give notice to the eligible person/s and to
 The controlling authority
 Specifying the amount of gratuity determined

8. Time limit for payment of gratuity
 The employer shall arrange to pay the amount of gratuity within thirty days
from the date it becomes payable
 If not paid within the period stipulated above employer is liable to pay interest
for the delayed payment
 Interest is not payable if the delay was caused due to the fault of the employee
and
 the employer has obtained permission in writing from the controlling authority
for the delayed payment on this ground
 If there is any dispute as to the amount payable or the persons eligible to
receive it
 the employer shall deposit amount as per his calculation with the controlling
authority.
Procedure for resolving the disputes
 Where there is a dispute the aggrieved party shall make an application to the
controlling authority for deciding the dispute.
 controlling authority shall, after due inquiry and
 after giving the parties to the dispute a reasonable opportunity of being heard,
 determine the matter and pass appropriate orders
Powers of controlling authority
 The controlling authority shall have the powers in respect of the following
matters, namely
(a) enforcing the attendance of any person
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses.

9. Appeal against the order of controlling authority
 Appeal if any shall be made within 60 days from 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 </li></ul>
Forfeiture of Gratuity
 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; the gratuity
payable to an employee may be wholly or partially forfeited
 if the services of such employee have been terminated for
 his disorderly conduct or any other act of violence on his part, or
 any act which constitutes an offence , provided that such offence is
committed by him in the course of his employment
Section 6 Nomination

10.  Employees having family shall make nomination in favor of one or more family
members only
 Employee not having family may make nomination in favor of other person/s
but such nominations becomes invalid if he acquires a family at a later date .
 Thus he/she has to make fresh nomination after acquiring the family.
 Employee has the right to change the nomination in accordance with the
provisions of this Act
 If a nominee predeceases the employee, the interest of the nominee shall
revert to the employee
 who shall make a fresh nomination
 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.

11. Section 7 Determination of the amount of gratuity
.
Section[ 7.A] Inspector and his powers
 Government shall appoint inspectors to implement the provisions of this Act
 Every inspector is deemed to be a public servant under the Indian Penal Code
POWERS
 require an employer to furnish any information
 enter and inspect any place of work
 for the purpose of examining any register, record or notice or other document

12.  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
Protection of gratuity
 gratuity payable
 Shall NOT be liable to attachment in execution of any decree or order of any
civil, revenue or criminal court
Section 8 Recovery of gratuity
 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.
 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

13. Section 9 penality

14. OTHER PROVISIONS

16. DIFFERENCE BETWEEN PF AND GRATUITY