The Payment of Gratuity Act, 1972 At a Glance

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The Payment of Gratuity Act, 1972At a Glance
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Applicability

• 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.

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Payment 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

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Calculation of Gratuity

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

• Mode 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.3,50,000
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Determination, application and notice 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.

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Determination, application and notice for payment
of gratuity

• 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.

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Gratuity 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.

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Gratuity Disputes

• 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

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Dispute as to Gratuity

• Appeal Procedure

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.
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Forfeiture 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.

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Recovery 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.

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Exemption 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.

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Nominations

• 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.

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Cognizance 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.

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Penalties
OFFENCE
PENALTY
False statements to avoid payment
6mts imprisonment or Rs.10,000 or both
Default in complying with Act
3mts 1yr imprisonment or Rs.20,000 or both
Non-payment of Gratuity
6mts 2yr imprisonment
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The End