THE PAYMENT OF GRATUITY ACT

1972
Gratuity is a kind of retirement benefit

It is to help an employee
after his
retirement

The general principle

underlying gratuity schemes is
that by faithful
service over a
long period the employee is
entitled to claim a
certain
amount as retirement
benefit

Cont..
The

Gratuity is thus earned by the

employee as a reward for long
service

Employee

becomes entitled to
gratuity on his retirement or
termination or on leaving the service
after completion of 5 yrs service

PAYMENT OF GRATUITY SEC 4

Gratuity shall be paid to an
employee on termination after he
has worked continuously for not
less than 5 yrs
1. On his superannuation (retirement
after certain age limit)
2. On his resignation
3. On his death

RATE OF GRATUITY SEC 4(2)

It

is mandatory (compulsory) to pay

gratuity to those employees who
have worked for not less than 5 yrs
with the employer
The employee is entitled to receive
gratuity at the rate of 15 days salary
per completed year of the service

 The

computation of gratuity will be on a

the last salary drawn of the employee

Incase

of monthly rated employees, the

rate of ones wages is to be computed
by dividing the monthly wages by 26
days

The

maximum limit of gratuity is

Rs. 3,50,000/-

FORFEITURE OF GRATUITY
SEC 4(6)
The

gratuity of an employee whose

services have been terminated for any
act or negligence causing any damage
or loss or destruction of property
belonging to the employer shall be
forfeited to the extent of the damage
or loss caused

Cont

The gratuity payable to an

employee may be wholly or partially
forfeited if the services of such
employee have been terminated for

1.

His disorderly conduct or any other

act of violence on his part

Cont.
2. Any act which constitutes an
offence
involving moral
behaviour, if such offence is
committed by him in the
course
of his employment

PROTECTION OF GRATUITY SEC

13
Incase

of death of the employee, the

amount due to him an account of his
gratuity has to be paid to his legal
representative. It means the gratuity
becomes attachable in the hands of the
legal representative
The gratuity payable under this act
cannot be attached by any other reason

COMPULSIONS FOR EMPLOYER

1.

If the employee has completed 5 yrs

of the service with the employer, it is
mandatory for the employer
I) To determine the amount of gratuity
as soon as it becomes payable
II) To inform to the employee in writing
III) To inform to the Controlling
Authority in writing

Cont..
IV) To pay gratuity within 30 days
2. If the employer fails & neglects to pay
the gratuity, the employee has to give
notice
3. Incase if the employer does not
accept
the claim of gratuity raised
by the employee, then the reason as to
why claim is not accepted has to be
given

Cont.
4. If the employer does not take any
action within 90 days, the employee has
to apply to the Controlling Authority
5. The Controlling Authority after hearing
to both the parties will pass the
appropriate order on the application for
gratuity

Cont
6. The employer has to pay the
amount of gratuity in cash if so
desired by the employee or Demand
Draft or by Bank Cheques
7. If the gratuity is not paid by the
employer within 30 days from the
date it becomes payable, the
employer has to pay interest at 10 %
p.a.