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Salient Features

Payment of Gratuity act 1972

Gratuity imports of a gift or a present in return for favour of services generally, It is a social security enactment, which provides a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantation, ports, railways companies, shops or other establishments and for matter connected therewith or incidental thereto. It is an sort of an award which an employer pays out of his gratitude, to an employee for his long and meritorious service, at the time of his retirement or termination.


a. Every factory, mine oilfield, plantation, port and railway employees. b. every shop or establishment within the meaning of any law for the time being in force in relation to shop and establishment in state, in which 10 or more persons are employed or were employed an any day of the preceding 12 months. c. to every transport motor undertaking, in which 10 or more persons are employed or were employed an any day of the preceding 12 months. d. such other establishments or class of establishments, in which 10 or more employees are employed or were employed an any day of the preceding 12 months, as the central govt may, by notification, specify in this behalf.

Contribution of Employee Employers Contributions Eligibility


Gratuity is payable to an employee on the termination of his employment after he has rendered continuous service but not less that 5 yrs (1) On his superannuation (2) on his retirement or resignation (3) on his death or disability due to accident or disease.

Amount Payable to employees

At the rate of 15 days wages based on the rate of wage last drawn by concerned employee. If the piece rate, daily wages are computed on the average of total wages received by him for a period of 3months immediately preceding the termination. In case seasonal establishment and who is not employed throughout the year , the employer shall pay gratuity at the rate of 7 day wages for each season. The amount is not to exceed rupees 3lakhs and 50 thousand.


Gratuity can be forfeited {Sec 4(6)} where an employee has been terminated: (i) for any act, willful omission or negligence causing any damage or loss to or Destruction of any property belonging to the employer, to the extent of such loss or Damage. (ii) For riotous or disorderly conduct or any act of violence on his part. (iii) For any act which constitutes an offence involving moral turpitude, provided the offence has been committed by him in the course of his employment.


Each employee who has completed one year of service is required to make a nomination for the purposes of gratuity in case of his death. There can be more than one nominee. (Form F). 15 days wage No of completed years of service .(Not more than 3,50,000) 7 days wage No of seasons for which employed. Last pay * No of yrs* 15/26. Within 30 days if it exceeds along with simple interest @10% .p.a

Amount of gratuity

Time limit for payment