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Payment Of Gratuity Act,

1972
Gratuity
 A kind of retirement benefit.
 It is a payment that is intended to help an
employee after his retirement.
 General principle - for faithful service over a
long period the employee is entitled to claim
a certain amount as retirement benefit.
 Earned by an employee for long &
meritorious service.
Definitions: section-2

 S.2 (e) "employee" means any person employed to


do any skilled, semi-skilled, or unskilled, manual,
supervisory, technical or clerical work
 it does not include an apprentice
 S.2 (s) "wages" includes dearness allowance but
does not include any bonus, commission, house rent
allowance, overtime wages and any other
allowance.
Enactment of
Payment of Gratuity Act
{1972}
 Proposal for enactment was discussed in:
• Labour Minister’s Conference {Aug 24 &
25}
• Indian Labour Conference {Oct 22 & 23}

 A bill was passed as the Payment Of Gratuity


Act 1972.
Scope And Coverage
 The Act applies to the whole of India.
 The Act applies to:
•Every mine , factory, oilfield, plantation, port
& railway company.
• Every shop or establishment in which 10 or

more persons are employed.


 The Act does not apply to:
• Persons who hold civil Posts under the Central

Government or State Government.


Payment of Gratuity
It is a payment that is intended to help an
employee after his retirement whether the
retirement is due to super-annuation or due to
some physical disability.
How to calculate the Amount of
Gratuity
 Monthly rated employee :
At the rate of 15 days wages based on the rate of wages last drawn by the
employee concerned:

Formula: last drawn wages * 15 days * No. of completed year of service


26
 piece-rated employee, daily wages :
On the average of the total wages received by him for a period of three months
immediately preceding the termination of his employment excluding overtime
wages

 seasonal establishment
At the rate of seven days wages for each season.
 Maximum Limit Rs.3,50,000/-
 Higher benefits can be paid if the employer so desires.
Payment of Gratuity
1. Gratuity should be paid to an employee on
the termination of his employment after he
has rendered service for not less than 5 yrs -
 on his super-annuation
 his retirement
 his resignation
 on his death or disablement due to disease or
accident
Payment of Gratuity
Condition:-
 Completion of continuous services of five years is not
necessary when the termination of employee is due to
death of disablement.
 In case of death of employee gratuity payable to him is
paid to his nominee.
2. For every completed year of service or part, the
employer shall pay gratuity to the employee at the rate
of fifteen days wages based on the rate of the wags last
drawn by the employee concerned.
Payment of Gratuity
3. The amount of gratuity payable to an
employee shall not exceed three lakhs and
fifty thousand rupees.
4. Nothing in this section shall affect the
right of an employee to receive better terms
of gratuity under any award or agreement or
contract with the employer.
Nomination
1. If an employee has a family at the time of making
a nomination, the nomination shall be made in
favor of one or more member of his family .
2. If any nomination is made by an employee in
favor of a person who is not the member of his
family, shall be void.
3. If an employee has no family at the time of
making a nomination, the nomination shall be
made in favor of any person or persons
Nomination
4. If the employee acquires a family after
making a nomination then such nomination
become invalid, and a fresh nomination is
made in favor of a family member.
5. Every nomination , fresh nomination or
alternation of nomination shall be sent by
the employee to his employer, who shall
keep it in his safe custody.
Determination of the Amount of
Gratuity (Sec.7)
•Application for gratuity[sec7(1)]:
An employee who is eligible for payment
of gratuity can give an application in
writing to the employer within 30 days
from the date the gratuity becomes
payable.
.
Determination of the
Amount of Gratuity (Sec.7)
 Determination of gratuity [Sec7(2)]:
Employer determine the amount of the gratuity and
give notice to controlling authority and the employee.
 Payment of gratuity[sec7(3)]:
Employer pay the amount of gratuity to the
employee.
Determination of the
Amount of Gratuity (Sec.7)
 Payment of interest[sec7(3A)]:
Interest is paid if the amount of gratuity is not paid
within a period of 30 days at the rate notified by
central government.
 Dispute as to Gratuity[sec7(4)]:
If disputes arises regarding the amount of the
gratuity and the claim taken by nominee the
employer deposit the amount to the controlling
authority, and he solve the dispute.
Inspectors(Sec.7A)

 Appointed by the Government for the


purpose of this act.
 Two or more inspector can be appoint for the
same area.
 Every Inspector shall be deemed to be a
public servant within the meaning of section
21, of the Indian Penal Code, 1860.
Powers of the Inspectors(Sec
7B)

 Ask for any information from the employer.


 Examining any register, record or notice or
other documents.
 Search and seize register, record, notice or
other document in respect of offence;
Recovery of Gratuity(Sec 8)

 Controlling authority issued certificate to the


collector on behalf of aggrieved party.
 Collector recover the amount together with
compound interest.
 Amount of interest should not exceed the
amount of gratuity.
Penalties
(1) Whoever, for the purpose of avoiding any payment to be
made by himself under this Act or of enabling any other
person to avoid such payment, knowingly makes or causes
to be made any false statement or false representation shall
be punishable with imprisonment for a term which may
extend to six months, or with fine which may extend to ten
thousand rupees or with both.
Penalties
2) An employer who contravenes, or makes
default in complying with, any of the
provisions of this Act or any rule or order made
there under shall be punishable with
imprisonment for a term which shall not be less
than three months but which may extend to one
year, or with fine which shall not be less than
ten thousand rupees but which may extend to
Can Gratuity be withheld by the
employer ?
 The gratuity of an employee, whose services have been
terminated for any act, willful omission or negligence
causing any damage or loss to, or destruction of, property
belonging to the employer, shall be forfeited to the extent
of the damage or loss so caused.
The gratuity payable to an employee may be wholly
or partially forfeited
 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
If the services 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.
Protection Of Gratuity
 No gratuity payable under this Act and no
gratuity payable to an employee employed in
any establishment, factory, mine, oilfield,
plantation, port, railway company or shop
exempted under section shall be liable to
attach­ment in execution of any decree or
order of any civil, revenue or criminal court.
Thank you

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