Provisions of Gratuity Act, 1972 1. Introduction 2. Applicability of the Act 3. Calculation of gratuity 4. Formula for calculating gratuity is as follows 5. Explanation 6. Amount of Gratuity Payable 7. Nomination 8. Forfeiture of Gratuity 9. Compulsory insurance 10. Notice of opening change and closure 11. Determination of Amount of Gratuity 12. Demand and Claim of Gravity 13. Mode of payment 14. Power of controlling authority 15. Appeal 16. exemption from liability 17. Protection of gratuity 18. Display of the act

1. Provisions of Gratuity Act, 1972
Presentation by Chandan Bhosale

2. INTRODUCTION
 Gratuity is defined from the Latin Word ‘Gratuitus’
 Gratuitus means a gift or something which without consideration
 This is the gift to be given by the employer to the employee for the loyalty shown by him
 Loyalty means number of years of service which should be as more as possible
 Minimum period required for the eligibility of gratuity is 5 years
 However in the case of death or disablement only one years service is sufficient

3. INTRODUCTION
 There is rounding off rule in the last year of service period which means more than 6 months
period shall be rounded off to one year, for example
 4 years 4 months = 4 years
 4 years 6 months = 4 years
 4 years 6 months 1 day = 5 years
 Gratuity is off the job benefit also called retirement benefit. It is because it is paid only after
leaving the job
 There is no advance system from gratuity payment as was present in the Provident Fund
 Gratuity act was enacted on 16th sept 1972

4. Applicability of the Act
 The act applies on the whole India including J&K
 It applies on every factory and any establishment where 10 or more workers are working
 It also applies on plantation, port, mine, oilfield and railways whatever may be the no of workers
 There is no eligibility period of claiming the gratuity and there is no salary limit for gratuity
purposes
 An employee becomes eligible for gravity on the date of joining the establishment but he can
claim the same only at time of the leaving the establishment after minimum 5 years

5. Calculation of gratuity
 Gratuity is calculated differently for different types of workers
 Different types of workers are as follows
 Monthly rated employee who gets salary on monthly basis
 Daily rated employee who gets salary per day
 Piece rated employee who gets salary on the basis of output
 Seasoned employee means a worker who is not employed throughout the year

6. Formula for calculating gratuity is as follows
 Monthly rated
 Gratuity = Last drawn salary * No of years of service * 15/26
 Daily rated
 Gratuity = Last 3 months average wage * No of years of service * 15/26
 Piece rated
 Gratuity = Last 3 months average wage * No of years of service * 15/26
 Seasonal worker
 Gratuity = Last season salary/Last season days * 7 * No of seasons workers

7. Explanation
 Maximum period for computation is 33 years
 Salary means basic salary and dearness allowance
 Salary should be taken without any deductions
 Any overtime allowance or any other kind of payment shall not be added to the wages
 Service period should be continuous and without any break however ant uncontrollable break is
allowed such as accident
 Each year of service should be continuous and complete this means employee must be present
for following number of days in each year of service
 5 days of week : 190 days per year
 6 days of week : 240 days per year
 Seasoned employee : 75% days in each season

8. Amount of Gratuity Payable
 Gratuity shall be calculated as per respective formula
 If the amount calculated is less than 20 lakhs it will be paid
 If the calculated amount is more than 20 lakhs employers liability is to pay 20 lakh however if he
wants to pay more he can pay more

9. Nomination
 Nomination is required only after competition of 1 year service
 Nomination must be done within 30 days after competition of 1 year
 Nomination must be done in form F
 Nomination if the responsibility of the employer
 Nomination must be in the favour of family members
 Family includes following people
 Employee himself
 Spouse, only legal
 Children, any number, biological or adopted, whether married or unmarried legal or illegal
 Dependent parent of employee
 Dependent parent of spouse of employee
 Widow and children of Pre deceased son

10.  When employee marries after filling form F, he will fill form G to declare the nominee again within
90 days
 Employee can change the nominee at any time by filing form H
 If a person is already married, at the time of filing form F then form G is not applicable on them
 Nomination should be submitted in duplicate which means 2 copies shall be submitted by the
employee
 If employee is illiterate nomination form shall be signed by 2 witnesses

11. Forfeiture of Gratuity
 Gratuity should be liable to be fortified if specific offences is committed
 Forfeiture can be partial or total
 Forfeiture can happen because of following reasons
 Fraud
 Violent behaviour
 Misappropriation of asset

12. Compulsory insurance
 It might happen that employer do not have much funds at retirement of employee
 If employer purchases insurance policy for his liability at least employee will be safe because he
will surely get gratuity either form employer or from insurance company
 Premium on such policy shall be paid by employer only and cant be recovered by employee
 This insurance is compulsory but if following two conditions are fulfilled insurance are not
required
 There must be 500 or more employees
 There must be separate gratuity fund maintained by every employer for every employee keeping
the amount of all employee gratuity

13. Notice of opening change and closure
 Gratuity doesn't apply on all organisation it applies on factories, oilfield, plantation, port, mines
and railways. It also applies on all organisation having 10 or more workers
 Whenever applicability arrives employer must inform government authorities also called
controlling authority also called labour commissioner in form Within 30 days
 Employer will also inform to controlling authority when there is any change in the structure of
organisation such as partnership to company or proprietorship to one person company etc
relevant form is form B to be filled within 30 days of any change
 Whenever the employer wants to close the organisation he must inform the controlling authority
in form C 60 days in advance of the date of intended closer . In other words employer can close
organisation only after 60 days of filling form c

14. Determination of Amount of Gratuity
 Employer must determine the gratuity himself without waing for any claim from the employee
 Payment must be made within 30 days of leaving the establishment
 After 30 days late payment interest will apply @10% p.a
 If the employer doesn't pay gratuity at all employee can claim the gratuity in the office of
controlling authority

15. Demand and Claim of Gravity
 Employee can apply for gratuity to employer in the form I, after 30 days within 30 days or even
before leaving the establishment
 In case employee has died nominee can clain gratuity in form J, within 1 year from death
 If nominee is unavailable, legal heir of employee can claim gratuity in form K within one year of
death of employee
 Employer will answer to the employee legal heir or nominee within 15 days in form l in case he is
ready to pay form M in case he is rejecting to pay
 If employer doesn't pay and doesn't reply within 15 days employee can apply to controlling
authority
 Employee can fill application to controlling authority within 90 days from refusal by employer in
form N

16.  Controlling authority will issue notice to employer and demand his explanation in the specified
number of days form of notice is form O
 Controlling authority can issue summon to anyone to be present before authority to give
explanation formulate of summon is in the form P
 After giving an opportunity of being heard to everyone controlling authority gives final decision in
form R

17. Mode of payment
 Gratuity can be paid in cash and not in kind
 Cash means cash cheque demand draft pay order and direct fund transfer
 If the gratuity amount is less than 1000 it can also be paid by postal money order
 If the employee has died gratuity can be paid To nominees however if nominee is minor it shall
be converted into fixed deposit. This fixed deposit should be kept safe within the controlling
authority FD must be made in nationalized bank only this FD should be handed over to nominee
when he becomes major

18. Power of controlling authority
 Controlling authority has all the power of civil Court
 following are such powers
 demand attendance of anyone
 demand statement of oath
 demand document from anyone
 demand evidence from anyone
 issue commission for examination

19. Appeal
 If a person is aggrieved by the order of controlling authority he can appeal to appropriate
government within 60 days
 Appropriate government can either take appeal itself or it can further appoint some higher
authority

20. exemption from liability
 if the employer applies in good faith then he is not in a position to pay gratuity state government
can provide partial or complete exemption from gratuity liability
 Exception should be avoided only on merit

21. Protection of gratuity
 Gratuity shall remain protected from any entitlement
 It means gratuity is a personal property of employee and his creditor cannot claim money from
this

22. Display of the act
 Employer must display summary of gratuity act and rules for the reference by employees and
employers
 This must be displayed in English as well as local language
 Format of this display is form U

23. THANK YOU