The Payment of Gratuity The Payment of Gratuity Act, 1972Act, 1972

At a Glance…At a Glance…

ApplicabilityApplicability

• 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.

Payment of GratuityPayment 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

Calculation of GratuityCalculation of Gratuity

Basic + DA X 15 X No. of year of service / 26Basic + DA X 15 X No. of year of service / 26

Mode of payment of GratuityMode 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.3,50,000Maximum amount payable is Rs.3,50,000

Determination, application and Determination, application and notice for payment of gratuitynotice 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.

• 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.

Determination, application and Determination, application and notice for payment of gratuitynotice for payment of gratuity

Gratuity DisputesGratuity 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.

Appeal

• The appeal is made by the person aggrieved by order of Controlling Authority.

• Limitation – 60 days from the date of receipt of order which is further extended to 60 days more on sufficient cause.

• Appeal is not maintable if certificate of claimed gratuity amount issued by Controlling Authority is not produced

Gratuity DisputesGratuity Disputes

Appeal ProcedureAppeal Procedure

Dispute as to GratuityDispute as to Gratuity

Necessary entry is made in the record on receipt of decision of

appellate authority.

Notice is issued to employer to direct him to make payment of

gratuity to the applicant within 15 days of receipt of notice.

Forfeiture of GratuityForfeiture of Gratuity

• If service is terminated by any act, willful omission, negligence causing damage or destruction of property, forfeiture is to the extent of damage.

• Wholly or partially forfeited– If termination is due to riotous or

disorderly conduct or violence on employees part.

– For offence involving moral turpitude in course of employment.

Recovery of GratuityRecovery of Gratuity• If the amount of gratuity payable under this Act is not paid

by the employer, within the prescribed time, to the person entitled thereto,

– the controlling authority shall, on application made to it, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at such rate as the Central Government may specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto.

• Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate

• The amount of interest payable shall, in no case exceed the amount of gratuity payable under this Act.

Exemption of GratuityExemption of Gratuity

Appropriate Govt. may grant exemption

To Whom: to Establishment, factory, etc and employee or class of employees employed in any establishment, factory, etc…

When: if they are in receipt of gratuity or pensionary benefits not less favorable than the Act.

NominationsNominations• To be made after completion of 1 years service.

• 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, 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.

• 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.

Cognizance of offenceCognizance of offence

• No court shall take cognizance of any offence punishable under this Act save on a complaint made by or under the authority of the appropriate Government.

• Gratuity, if not been paid, or recovered, within 6 months from the expiry of the prescribed time, the appropriate Government shall authorize the controlling authority to make a complaint against the employer, whereupon the controlling authority shall, within 15 days from the date of such authorization.

• No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under this Act.

PenaltiesPenalties

False statements to avoid payment

Default in complying with Act

Non-payment of Gratuity

6mts imprisonment or Rs.10,000 or both

3mts – 1yr imprisonment or Rs.20,000 or both

6mts – 2yr imprisonment

OFFENCEOFFENCE PENALTYPENALTY

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