PAYMENT

OF
GRATUITY ACT, 1972
BY-:
ARPIT GUPTA
ROLL NO.- 15001116008
MBA [HR&IR] 2014-16

BASIC UNDERSTANDING
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 & faithful
service

Enactment of Payment of
Gratuity Act 1972
Proposal for enactment was discussed in parliament in

August 72 . It came into existence in Sept.72

The Act provides for compulsory Payment of Gratuity by
the mngt. To the all employees in factories , plantations,
mines, oil fields, ports, railway companies, other
establishments employing ten or more persons in the
event of superannuation, retirement, resignation and
death or disablement due to accident or disease. The
quantum of gratuity will be 15 days wages based on at
the rate of wages last drawn by the employees concerned
for every completed year of service or part thereof in
excess of 6 months (subject to max. of Rs. 2.5 lakhs)

DEFINITIONS-:
Appropriate Govt. In relation to an establishment:

a)Belonging to, or under the control of CG

b)Having branches in more than one state.
c)Of a major port, mine, oilfield or railway company, the
Central Govt.
In any other case, the State Government
Controlling Authority: means an authority appointed by
AG . The AG by notification published in the official
Gazatee appoint any officer to be a controlling
authority , who shall be responsible for the
administration of the Act. Diff. controlling authorities
may be appointed for different areas.

CONTD
Employee means any person(other than an

apprentice) employed on wages(not exceeding

Rs. 1,600/- per month) has been omitted, in
any establishment , factory, mine oilfield,
plantation, RW co. or shop , to do any skilled,
semi-skilled, or unskilled, manual, supervisory,
technical or clerical work, whether the terms of
such employment are express or implied and
whether or not such person es employed in a
managerial or administrative capacity but does
not any such person who holds a post under
CG/SG & is governed by any other Act or by
any rules providing for payment of gratuity.

CONTD.
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.
Formula Of Gratuity =(Last Month Wages
*15*No. of years of Services)/26
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

CONDITIONS-:
1.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 wages last drawn by the employee
concerned:
But in case of piece rated employee , daily wages
shall be computed on the avg. of the total wages
recd. By him for a period of 3 months.

CONTD
3. The amount of gratuity payable to an employee shall not
exceed three lakhs and fifty thousand rupees
4. For computation of gratuity payable to an employee who is
employed , after his disablement on reduced wages, his wages
for the period preceding his disablement shall be taken to be
wages recd. By him during that period & his wages for the
period subsequent to his disablement shall be taken to be the
wages as so reduced.
5. Forfeiture of Gratuity(a)of an employee whose service has
been terminated for any act, wilful omission/negligence causing
any damage or loss to , or destruction of property belonging to
the employer , shall be forfeited to the extent of damage or
loss
(b) The gratuity payable to an employee shall be wholly forfeited
If the services of such employee have been terminated for the
(i)riotous or disorderly conduct/violence(ii) for moral turpitude

NOMINATION-:
1.Each employee will nominate person after completion
of 1 yr. of service , within 90 days
2.Can distribute amount more than one nominee
3. 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 If any nomination is
made by an employee in favor of a person who is not
the member of his family, shall be void.
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

Determination of the Amount of Gratuity

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
Employer determine the amount of the gratuity and give
notice to controlling authority and the employee.
Employer Failed to pay the amount of gratuity to the
employee on due date , employer have to pay interest
on it at the rate decided by CG time to time
If disputes arises regarding the amount of the gratuity
and the claim taken by nominee the employer deposit
the amount to controlling authority & after due inquiry ,
CA shall pay the amount deposited including the excess
amount, if any , to the person entitled thereto.

INSPECTORS-:
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 IPC,
1860.
Powers of the Inspectors
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
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
Government has no power either to stay
recovery or grant installment facilities to
employer in making payment.

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 6 m. or fine may extend to
Rs. 10000/ or with both.
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 Rs.10000/- which may
extend to Rs. 20000/-or with both

PROTECTION OF GRATUITY-:

No gratuity payable under this Act and no gratuity payable to an

employee employed in an 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 an civil,
revenue or criminal court

Power to make Rules

The appropriate Government may, by notification make rules for

the
purpose of carrying out the provisions of this Act.

Every rule made by the Central Government under this Act shall
be
laid, as soon as may be after it is made, before each House of
Parliament while it is in session

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