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Payment of gratuity act 1972

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an brief of Gratuity Act

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Payment of gratuity act 1972

  1. 1. • Latin word – Gratuitous • Gratuity means a lump sum payment made by an employer as the retrial reward for his past service when his employment is terminated
  2. 2.  Retiring benefit-Long and Unblemished service
  3. 3. except  Shop and establishment covered under SHOPS AND ESTABLISHMENT ACT- 10 or more persons - immediately preceding to 12 months.  Once this act applies – continue to be governed – irrespective of no of persons  It shall come into force on such date as the central government may by notification , appoint
  4. 4.  Employee does not include- holds post under central or state government  Teacher cannot be called as employee due to amendment of this act
  5. 5.  Continuous Service” means uninterrupted service which may be interrupted on account of sickness , accident , leave , absence from duty without leave(not being treated as break in service),lay-off , strike , lock- out or cessation of work not due to the fault of the employee.  Whether such uninterrupted or interrupted service was rendered before or after the commencement of the Act
  6. 6.  If an employee is not in continuous service within the meaning of CLASS-1 he shall deemed to be in continuous service. For a period of 1 year :  190 Days, if the employee was employed below the ground in a mine  190 Days ,if the employee was employed in an establishment which works for less than 6 days in a week  240 Days, in any other case
  7. 7. For a period of 6 months :  95 Days , if the employee was employed below the ground in a mine  95 Days , If the employee was employed in an establishment which works for less than 6 days in a week  120 Days , In any other case
  8. 8. Gratuity is payable when there is :-  Continuous service of 5 yrs(not necessary incase of death or disablement)  Incase of death ,the amount shall be paid to nominee or legal heir  Time limit- Within 30 days of gratuity becoming payable  Maximum Amount-The gratuity payable to an employee shall not exceed Rs. 10,00,000
  9. 9.  It is mandatory where number of employees is more than 500  The registration shall be done in prescribed time & in prescribed manner  The insurance shall be taken from LIC or any other prescribed insurance company  However , employer of an establishment belonging to or under the control of CG or SG are exempted from the operations of sec.4A.
  10. 10.  Every employee, who has completed 1 yr of service , is compulsorily required to make a nomination (Form F)  The nomination must be made within 30 days
  11. 11. The nomination must be made in favor of one or more members of the family(nomination shall be void if it is made in favor of a person who is not a member of his family) If at the time of making nomination, the employee does not have family, the nomination may be made in favor of any person The employee may distribute the amount of gratuity amongst more than one nominee
  12. 12.  Application can be made by :- • An employee who is eligible for payment of gratuity • Any person authorized in writing by such employee • Nominee of the employee(if the deceased employee had made a nomination) • Legal heir of the employee(if the deceased employee had not made any nomination)
  13. 13.  If the employer fails to pay the gratuity within the prescribed time (i.e., within 30 days of termination of employment) , the controlling authority is empowered to issue a certificate to the collector to recover the amount of Gratuity  The employer shall also be liable to pay Compound interest at such rate as may be notified by CG from time to time  The interest shall be paid from the date of expiry of the prescribed period& ending with actual date of payment of Gratuity  The interest payable shall not exceed the amount of gratuity payable
  14. 14. OFFENCE PENALTY False statement to 6 months imprisonment or avoid payment Rs 10,000 or both 3 months-1 yr Default in complying imprisonment or Rs 20,000 with Act or both Non-payment of 6 months-2 yrs Gratuity imprisonment
  15. 15.  Monthly Rated Employee  Piece rated employee  Employee of a Seasonal Establishment
  16. 16. • Last drawn wages x 15/26 x Completed years of Service (incl. a part of year in excess of 6 months) NOTE: • Wages = Last drawn • Month = Period of 26 Days • 15 days wages = Last drawn wages x 15/26
  17. 17. • Last drawn wages x 15/26 x Completed years of Service(incl. a part of year in excess of 6 months) NOTE: • Last drawn wages = Total wages received during 3 months immediately preceding termination/Days actually worked • Last drawn wages shall not include overtime wages
  18. 18. • Such an employee shall be paid gratuity at the rate of 7 days wages for each season

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