The Payment of Gratuity Act 1972

General Principle : By faithful service over long period the employee is Entitled to claim a certain amount as Retirement benefit. Thus it is earned by employee as a reward for long & meritorious service.
Objective : To provide for a scheme of compulsory payment of gratuity by Management of factories, ports, railway etc.& other establishment employing 10 or more persons in event of superannuation, retirement, resignation & death or disablement.

Extent of the Act:[Sec.1(2)] Scope of Coverage : The Act applies to 1) Every factory, mine, oilfield, plantation, port & railway company 2) Every shop or estab.in which 10 or more persons were employed 3) Such other estab.or class of estab. As the central Govt. may by notification published in the O/G [Sec.1(3)]. If no. of persons falls below 10. This is to check employers. The act does not apply to I. Apprentices & II. Persons who hold civil post under central or state Govt. & are governed by any other Act providing for payment of Gratuity. The Govt. may exempt. Definitions i. Continuous Service [ Sec.2(w)] ii. Retirement [ Sec. 2(q)] iii. Superannuation [Sec. 2 ( r) ]

Payment of Gratuity [Sec.4] Sec. 4 deals with circumstances in which gratuity becomes payable & when gratuity may be forfeited. Various provisions of sec. 4 are: 1. Gratuity payable on termination of Employment: After employee has rendered continuous service for not loss than 5 Years i. On his superannuation or ii. On his retirement or resignation or iii. On his death or disablement due to accident or disease [Sec. 4(1)] The completion of 5 year service shall not be bar where the termination of employment is due to death or disablement. Gratuity payable nominee / heirs: if minor controlling authority 2. Rate of Gratuity : [Sec.4(2)] The employer shall pay gratuity to an employee @ 15 days wages based on the rate of wages last drawn by the employee concerned for every completed year of service Monthly rate of wages lost drawn In case of monthly rated employee = 15 26

3. Maximum Gratuity : [Sec. 4(3)] Amount shall not exceed Rs. 1,00,000 Exemption limit for Income Tax purpose has been raised from Rs. 1,00,000 to Rs. 2,50,000 4. Better terms of Gratuity [Sec. 4 (5)] An Employee may sometime entitled to receive better terms of Gratuity under any award or agree. With the employer. In such a case, nothing in sec.4 shall affect the right of the employee to receive better terms. 5. Exemption under sec. 5: Sec. 5 empowers app. Govt. to exempt by notification published in the O/G - - - - if in the opinion of the app. Govt. employees in such estab.c. are in receipt of gratuity and pensionary benefits not less favorable than the benefits conferred under this act.

Forfeiture of Gratuity [Sec. 4(6)] The Gratuity of an employee whose services have been terminated for any act. Willful omission or negligence causing any damages or loss to, or destruction of, property beloging to the employer Shall be forfieted to the extent at the damages or loss so caused. When a W/M is dismissed for his misconduct. Compulsory Insurance : [Sec. 4-A] Every employer employing 500 or more employees shall obtain an insurance for his liability for payment towards the gratuity under the act from the LIC or any other prescribed insurer with effect from such date as may be notified by the appr. Govt. Exemption : i) The appr. Govt. may exempta) Every employer who had already est. an approved Gratuity fund in respect of his employees & who desire to continue such arrange. b) Every employer employing 500 or more persons who est. an approved Gratuity Fund under the provision of the act.

Registration with controlling authority R Rules to be made by app. Govt. For: i) The composition of the Board of Trustees of the approved Gratuity fund & ii) The recovery by the controlling authority Failure to pay Insurance premium or contribution Employer shall be liable to pay the amount of Gratuity due under the Act(Including interest) to the controlling authority if anyone Contravenes :- Rs. 10,000, 1000/day [Sec.4-A(6)] Protection of Gratuity (Sec. 13) No Gratuity payable under this Act and no gratuity payable to an employee employed in any estab. , Factory---- or shop exempted under Sec. 5 shall be liable to attachment in execution of any decree or order of any civil, Revenue or criminal court Sec. 60(9) of C.P.C. 1908: Gratuity payable to the heirs of an employee on his death is attachment.

Nomination [Sec.6] i. Nomination within 90 /30 days ii. Distribution of amount of Gratuity iii. Nomination in favour of family members iv. Modification of Nomination v. Death of Nominee Determination of amount of Gratuity [Sec.7] i. Application for Gratuity ii. Determination of Gratuity iii. Payment of Gratuity iv. Payment of Interest v. Dispute as to Gratuity vi. Application to the controlling authority for direction vii. Powers of controlling authority viii. Appeal : Within 60 days to app. Govt. Recovery of Gratuity [Sec. 8] Controlling authority certification Collector compound Recovery Interest

Inspectors : [Sec. 7 A & 7 B] Penalties : [Sec. 9] For false statement or false representation : 6 months or Rs. 10,000 or both For contravention of Act: 3 months 1 Year / Rs. 10,000 Rs. 20,000/Protection of action taken in good faith [Sec.12] Display of abstract of the Act & Rules [Sec. 20]