The document discusses the Payment of Gratuity Act of 1972 in India. It defines gratuity as a monetary benefit given by an employer to an employee who has worked continuously for 5 or more years upon retirement. Gratuity is meant to help employees financially after leaving employment. Continuous service is defined as uninterrupted even with periods of leave, sickness, layoffs, etc. The Act applies to establishments with 10 or more employees, including factories, mines, ports, shops and plantations. Gratuity is calculated based on last monthly salary and years of service, and differs from provident funds which require contributions from both employer and employee over time.

1. THE PAYMENT OF
GRATUITY ACT
1972
D I PA N J A N R O Y
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GRATUITY ACT

2. GRATUITY
• Gratuity is a defined as a benefit given freely by the employer to the
employee for rendering services continuously for five years or more. It is
a monetary benefit usually given at the time of retirement.
• The main purpose and concept of gratuity is to help the workman after
the retirement, whether the retirement is a result of the rules of
superannuation or physical disability or impairment of the vital part of
the body.
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3. CONTINUOUS SERVICE
Employee shall said to be in continuous service even his/her service in
interrupted by way
• Sickness
• Accident
• Leave
• Absence from duty without leave
• Leave with full wage
• Temporary disablement
• Laid-off period
• Maternity leave : 26 weeks
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4. APPLICABILITY
• Every factory (as defined in Factories Act), mine, oilfield, plantation,
port and railway.
• Every shop or establishment to which Shops & Establishment Act
of a State applies in which 10 or more persons are employed at
any time during the year end.
• Any establishment employing 10 or more persons as may be
notified by the Central Government.
• Once Act applies, it continues to apply even if employment
strength falls below 10.
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5. DIFFERENCE BETWEEN PF AND GRATUITY
Gratuity Fund Provident Fund
It is like loyalty-fund that the employer
gives to the employee for his loyalty
(staying with the organization for over 5
years, no boundary of minimum 5 years of
service in case of Death/Disability). The
greater the no. of years of service, the
greater is the gratuity fund.
It is the lump sum payment the employees
receive at the time of retirement for which
both (employer and the employee) make
the contribution.
It is a defined benefit plan (because the
employer sponsors the fund).
It is a defined contribution (DC) plan
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6. CALCULATION OF GRATUITY
Where,
• Monthly salary= last month drawn salary by the employee.
• 26 = total number of working days in a month.
• 15 = number of days in half of the month.
Gratuity = (Monthly salary/26) X 15 X Number of years of service
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7. SAMPLE
GRATUITY
FORM
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