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Payment of gratuity act 1972
• 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
 Retiring benefit-Long and Unblemished
service
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
 Employee does not include- holds post under central
or state government

 Teacher cannot be called as employee due to amendment
of this act
 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
 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
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
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
 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.
 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
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
 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)
 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
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
 Monthly Rated Employee
 Piece rated employee
 Employee of a Seasonal Establishment
• 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
• 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
• Such an employee shall be paid gratuity at the
rate of 7 days wages for each season
Payment of gratuity act 1972

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Payment of gratuity act 1972

  • 2. • 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
  • 3.  Retiring benefit-Long and Unblemished service
  • 4. 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
  • 5.  Employee does not include- holds post under central or state government  Teacher cannot be called as employee due to amendment of this act
  • 6.  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
  • 7.  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
  • 8. 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
  • 9. 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
  • 10.  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.
  • 11.  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
  • 12. 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
  • 13.  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)
  • 14.  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
  • 15. 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
  • 16.  Monthly Rated Employee  Piece rated employee  Employee of a Seasonal Establishment
  • 17. • 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
  • 18. • 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
  • 19. • Such an employee shall be paid gratuity at the rate of 7 days wages for each season