The Payment of Gratuity The Payment of Gratuity Act, 1972Act, 1972

At a Glance…At a Glance…

By,Sheetal Londhe

ApplicabilityApplicabilityEvery 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 GratuityPayment 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: Calculation of Gratuity: For Every For Every completed Year of Service in excess of Six Monthscompleted Year of Service in excess of Six Months

Monthly rate of wage last drawn X 15 26

Mode of payment of GratuityMode 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.3,50,000Maximum amount payable is Rs.3,50,000

Determination, application and Determination, application and notice for payment of gratuitynotice 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.

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.

Determination, application and Determination, application and notice for payment of gratuitynotice for payment of gratuity

Gratuity DisputesGratuity 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.

Appeal

The appeal is made by the person aggrieved by order to Controlling Authority.

Limitation – 60 days from the date of receipt of order which is further extended to 60 days more on sufficient cause.

Gratuity DisputesGratuity Disputes

NominationsNominations To be made after completion of 1 years service. Form F

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 (Form ‘G’), 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. Form ‘H’

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.

“Family", in relation to an employee, shall be deemed to consist of

in the case of a male employee, himself, his wife, his children, whether married or unmarried, his

dependent parents the dependent parents of his wife

and the widow and children of his

predeceased son, if any

Family

Family

in the case of a female employee, herself, her husband, her children, whether married or unmarried, her

dependent parents and the dependent parents of her

husband and the widow and children of her

predeceased son, if any

Can adopted children become family members?

Where the personal law of an employee permits the adoption by him of a child,

any child lawfully adopted by him shall be deemed to be included in his family,

and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee

PenaltiesPenalties

False statements to avoid payment

Default in complying with Act

Non-payment of Gratuity

6mts imprisonment or Rs.10,000 or both

3mts – 1yr imprisonment or Rs.20,000 or both

6mts – 2yr imprisonment

OFFENCEOFFENCE PENALTYPENALTY

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