Presented by: 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
 Enactment of
Payment of Gratuity Act
{1972}
 Proposal for enactment was discussed in:
Labor Minister’s Conference {Aug 24 & 25}
Indian Labor Conference {Oct 22 & 23}

 A bill was passed as the Payment Of Gratuity Act

1972.
 Authorities of
Payment of Gratuity Act
{1972}
 Appropriate Government
 Controlling Authority
 Inspectors
 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
 Determination of the
amount
 Sec.(7)
Application for gratuity[sec7(1)]:
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)
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
Any offence relating to non
payment of gratuity under the
Act
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