The Payment of Gratuity Act of 1972 requires employers in factories, mines, ports, and other establishments employing 10 or more persons to pay gratuity to their employees. Gratuity is payable when an employee has 5 years of continuous service and is terminated due to superannuation, retirement, death, or disability. Gratuity amount is calculated as 15 days wages for every completed year of service, with a maximum of 3.5 lakhs. Employers must make payment within 30 days of application, and interest is payable for delayed payments. Disputes can be appealed to controlling authorities within time limits defined in the Act.

1. The Payment of Gratuity
Act, 1972
At a Glance…
By,
Sheetal Londhe

2. Applicability
 Every factory, mine, oil plantation,
port and railway company
 Every shop or establishment – if it
employs 10 or more persons in the
preceding 1 year.
 To any other establishment –
employing 10 or more persons.

3. Payment of Gratuity
Gratuity is payable if there is :-
– Continuous service of 5yrs (not necessary
incase of death or disablement)
– On termination due to superannuation or
retirement
– Resignation, death or disablement due to
accident or disease
– In case of death, the amount will be paid to
nominee or legal heir

4. Calculation of Gratuity: For Every
completed Year of Service in excess of Six Months
Monthly rate of wage last
drawn X 15
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Mode of payment of Gratuity
•In cash or DD or bank cheque
•Payment by postal money order if amount
is less than Rs.1000 if employee desires
Maximum amount payable is Rs.3,50,000

5. Determination, application and
notice for payment of gratuity
 Person eligible has to make a written
application to employer within 30 days when
it fell due.
 Incase of death, the legal heir must make
application within 1 yr from when
gratuity became applicable.

6. Determination, application and
notice for payment of gratuity
 As soon as gratuity becomes payable, employer
must determine the gratuity even before
application is made and must send notice to
person to whom it is payable.
 Within 15 days of receipt of application, employer
shall,
– If claim is admissible, send notice within 30
days
– If claim is inadmissible, send notice on form
‘M’
– To be paid within 30 days from the date it
becomes payable
– If not paid within 30 days, simple interest
from the payable date to paid date.
No interest if delay is due to employees fault.

7. Gratuity Disputes
 In case of any dispute wrt gratuity, the
amount must be deposited with controlling
authority and application must be made to
authority for direction within 90 days of
occurrence.
• Controlling Authority shall make due inquiries
and if claim is found admissible, direct
payment is made to person entitled.
• Such issue of direct payment must be made
to employer within 30 days from date of
receipt of the same by employer.

8. Gratuity Disputes
Appeal
 The appeal is made by the person
aggrieved by order to Controlling
Authority.
 Limitation – 60 days from the date of
receipt of order which is further
extended to 60 days more on sufficient
cause.

9. Nominations
 To be made after completion of 1 years service. Form F
 An employee may in his nomination, distribute the
amount of gratuity payable to him, under this Act
amongst more than one nominee.
 If an employee has a family at the time of nomination,
the nomination shall be made in favor of one or more
members of his family, and any nomination made by
such employee in favor of a person who is not a
member of his family, shall be void.
 If at the time of making a nomination the employee
has no family, the nomination may be made in favor of
any person but if the employee subsequently
acquires a family (Form ‘G’), such nomination shall
become invalid.
 A nomination may, be modified by an employee at any
time, after giving to his employer a written notice in
such form and in such manner as may be prescribed,
of his intention to do so. Form ‘H’
 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.

10. Family
“ Family", in relation to an employee,
shall be deemed to consist of
 in the case of a male employee,
 himself, his wife, his children,
 whether married or unmarried, his
dependent parents
 the dependent parents of his wife
and
 the widow and children of his
predeceased son, if any

11. Family
in the case of a female employee,
herself, her husband, her children,
whether married or unmarried, her
dependent parents and
the dependent parents of her husband
and
the widow and children of her
predeceased son, if any

12. Can adopted children become
family members?
 Where the personal law of an employee permits the
adoption by him of a child,
 any child lawfully adopted by him shall be deemed to be
included in his family,
 and where a child of an employee has been adopted by
another person and such adoption is, under the personal
law of the person making such adoption, lawful, such
child shall be deemed to be excluded from the family of
the employee

13. Penalties
OFFENCE PENALTY
False statements to 6mts imprisonment
avoid payment or Rs.10,000 or both
3mts – 1yr
Default in complying
imprisonment or
with Act
Rs.20,000 or both
Non-payment of 6mts – 2yr
Gratuity imprisonment

14. ~ The End ~