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12/07/2009

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Anish Gupta

What is Gratuity?
 Token of appreciation for the service given  A kind of retirement benefit  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  Gratuity is a lump sum amount that the employer

When Gratuity is paid?
At the time of
 Superannuation  Retirement  Resignation  Death  Disability (accident or illness)*

after the employee has rendered service for at least 5 yrs

 Proposal for enactment was discussed in:

Enactment of Payment of Gratuity Act {1972}
Labor Minister’s Conference {Aug 24 & 25} Indian Labor Conference {Oct 22 & 23}

 A bill was passed as the Payment Of Gratuity Act

1972.

 Appropriate Government  Controlling Authority  Inspectors

Authorities of Payment of Gratuity Act {1972}

Scope & 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: State of Jammu and Kashmir

Payment of Gratuity
 CASE-1 Employees are covered Under the Payment of

Gratuity Act, 1972: Gratuity shall be calculated as per the below formula: Gratuity =( Last drawn salary x 15/26 x No. of years of service) Last drawn salary = basic pay + D.A (dearness allowance)

Payment of Gratuity
 CASE-2 Employees are not covered Under the

Payment of Gratuity Act, 1972: Gratuity shall be calculated as per the below formula: Gratuity =( Last drawn salary x 1/2 x No. of years of service) Last drawn salary = basic pay + D.A (dearness allowance)

Maximum amount payable
 Before the 6th Pay Commission

Rs. 3.50lacs
 After the 6th Pay Commission

Rs. 10.00lacs Total Gratuity amount that a employee receive will not exceed the above amount

An eligible employee can give an application in writing to the employer within 30 days from the date the gratuity becomes payable.  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 Sec.(7) Application for gratuity[sec7(1)]:

Determination of the amount 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

Forfeiture
 If an employee is terminated due to

Willful omission or negligence causing damage to employer’s property for riotous or disorderly conduct or any act of violence moral turpitude

Protection
 No gratuity payable under the Act shall be

liable to attachment in execution of any decree or order of any civil, revenue or criminal court.  If the employee had agreed to a deduction from the amount due as gratuity then that amount can be recovered

Penalties
Details of Violation For avoiding any payment knowingly makes any false statement or representation Failure to comply with any provision of the Act or Rules Penalty Shall be punishable with imprisonment upto 6 months or fine upto Rs. 10,000.00 or both. Shall be punishable with imprisonment upto 1 year but will not be less than 3 months or with fine, which will not be less than Rs. 10,000.00 but may extend upto Rs. 20,000.00 or with both. Employer shall be punishable with imprisonment for a term which shall not be less than 6 months

Any offence relating to non payment of gratuity under the Act

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