GRATUITY ACT

RASHMI . S
 GRATUITY
• PREAMBLE : An Act to provide for a scheme for the payment of
gratuity to employees engaged in factories, mines, oilfields,
plantations, ports, railway companies, shops or other
establishments and for matters connected therewith or
incidental thereto.
•
• ‘Gratuity’ is a retrial benefit. This act envisages in providing
a retirement benefit to the workman who have rendered long
and unblemished service to the employer. Gratuity is a reward
for long and meritorious service.
 APPLICABLITY
• Every factory ,mine, oilfield,
plantation ,port, railways, company,
shop, establishment or educational
institutions employing ten or more
employees.
 SEC 2A- CONTINOUS
•
SERVICE
For the purposes of this Act, -
• (1) an employee shall be said to be in continuous service for a
period if he has, for that period, been in uninterrupted
service, including service which may be interrupted on
account of sickness, accident, leave, absence from duty
without leave (not being absence in respect of which an order
[***] treating the absence as break in service has been passed
in accordance with the standing order, rules or regulations
governing the employees of the establishment), lay off, strike
or a lock-out or cessation of work not due to any fault of
the employee, whether such uninterrupted or interrupted
service was rendered before or after the commencement of this
Act.
•
 FOR THE PERIOD OF 1 YR
• for the said period of one year, if the employee during the period
of twelve calendar months preceding the date with reference to
which calculation is to be made, has actually worked under the
employer for not less than -
•
• (i) one hundred and ninety days, in the case of an employee
employed below the ground in a mine or in an establishment
which works for less than six days in a week; and
• (ii) two hundred and forty days, in any other case;
•
• When is Gratuity Payable?
Gratuity shall be payable to an “employee” on the termination of his employment
after he has rendered continuous service for not less than five years.
a. On his superannuation.
b. On his retirement or resignation.
c. On his death or disablement due to accident or disease.

• NOTE: However, the condition of five years of continuous service is not necessary
if service is terminated due to death or disablement.
• Provided further that 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 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.]
•
To whom is Gratuity Payable?

Gratuity is normally payable to the employee himself,

however in the case of death of the employee it shall be
paid to his nominee & nomination has been made to his
heirs. Incase the nominee is a minor; share of the minor
shall be deposited with the controlling authority who
shall invest the same for benefit of the minor, until
he/she attains majority.
Amount of Gratuity Payable – Method of Calculation :

ØIn case of non –seasonal establishment:

Gratuity Payable = 15/26 days wages x No of completed years of
service X Rate of wages..

ØIn case of seasonal establishment:

Gratuity Payable= 7 days wages x No of seasons for which
employed.
Ø
ØExplanation: 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 of Gratuity

The government through an ordinance has

enhanced the maximum limit of the amount
of gratuity payable under the Act is Rs
100,000 to Rs 2,50,000 with effect from
02-04-97.Now at present the maximum limit
is 3.5 lacks.
 Forfeiture of gratuity : sec
10
• The gratuity of an employee whose service have been terminated for any Act of
willful omission or negligence causing any damage or loss to or destruction of
property belonging to the employer, gratuity shall be forfeited to the extent of
the damage or loss caused. The right of forfeiture is limited to the extent of
damage.

• The gratuity payable to an employee shall be wholly/ partly forfeited:

1. If the services of such employee have been terminated for his riotous or
disorderly conduct or any other act of violence on his part, or

2. If the service of such employee have been terminated for any act which
constitutes an offence involving moral turpitude, provided that such offence is
committed by him in the course of his employment.
 MORAL TURPITUDE
•
• moral turpitude is a gross violation of standards of moral conduct, vileness,
such that an act involving moral turpitude was intentionally evil, making
the act a crime. The existence of moral turpitude can bring a more severe
criminal charge or penalty for a criminal defendant.
• Moral Turpitude is the gross disregarding of moral standards expected of a
human being while doing some activity or crime. Eg. Raping in front of the
parents.
• A phrase used to describe conduct that is considered contrary to community
standards of justice, honesty, or good morals.
• Crimes involving moral turpitude have an inherent quality of baseness, vileness,
or depravity with respect to a person's duty to another or to society in
general. Examples include rape, forgery, robber
•
•
NOMINATION
Each employee, who has completed one year of service, shall make, within such time, in such form and in such
manner, as may be prescribed, nomination for the Purpose of' the second proviso to sub-section (1) of section
4.
• (2) An employee may, in his nomination, distribute the amount of gratuity payable to him under this Act amongst
more than one nominee.
• (3) If an employee has a family at the time of' making a nomination, the nomination shall be made in favour of one
or more members of his family, and any nomination made by such employee in favour of a person who is not a
member of his family, shall be void.
• (4) If at the time of making a nomination the employee has no family, the nomination may be made in favour of any
person or persons but if the employee subsequently acquires a family, such nomination shall forthwith become
invalid and the employee shall make, within such time as may be prescribed, afresh nomination in favour of
one or more members of his family.
• (5) A nomination may, subject to the provisions of sub-sections (3) and (4), 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.
• (6) If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make
a fresh nomination, in the prescribed form, in respect of such interest.
• (7) 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.
•
 SPECIAL POWER
•
• In case of the co’s bankruptcy, the first charge or
liability of the employer is to settle all his
employees P.F and gratuity.
• Rate of wages: Wages on the last day of the last
month of preceding 12 months.