The Payment of Gratuity Act,

1972

At a Glance…

Presented By,
Yogita Pawar
MBA (HR)
 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.
 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
 Calculation of Gratuity

Monthly rate of wage last drawn X 15

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

 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.
 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.

 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.
 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
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.
 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.
 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.
 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.
 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.
Contd….
• 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.
 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.
 Penalties

OFFENCE PENALTY

False statements to avoid 6mts imprisonment or

payment Rs.10,000 or both

Default in complying with 3mts – 1yr imprisonment or

Act Rs.20,000 or both

Non-payment of Gratuity 6mts – 2yr imprisonment

~ Thank You~
Any Queries???