 Gratuity means a lump sum payment made by an

employer as a reward for his past services when the

employee retires from employment
 Retiring benefit

 Long and Unblemished service

 Employees engaged in factories, mines, oilfields,

plantations, ports, railway companies, shops or other
establishments
 Delhi Cloth and General Mills Co. Ltd. v. Their
Workmen (1974) 1 L.L.J. 257

Object of providing a gratuity scheme is to provide a retiring

benefit to the workmen who have rendered long and
unblemished service to the employer and thereby
contributed to prosperity of the employer
 State of Kerala v. M. Padmanabhan Nair 1985
 Payment of Gratuity Act is a welfare oriented legislation meant
to confer certain benefits upon the employees working in
various establishments in the country.

 B. K. Kale v. Karnataka State Road Transport Corporation

1999
 Payment of Gratuity Act was enacted to introduce a scheme of
payment of gratuity for certain industrial and commercial
establishments as a measure of social security.
 (a) Appropriate Government

 (e) Employee

 (f) Employer

 (g) Factory: Section 2 of the Factories Act, 1948

(h) Family:
In case of Male employee includes:
 His wife,
 His children, whether married or unmarried,
 His dependent parents and
 The dependent parents of his wife and
 The widow and children of his predeceased son, if any,
In case of Female employees includes
 Her husband,
 Her children, whether married or unmarried,
 Her dependent parents
 The dependent parents of her husband and
 the widow and children of her predeceased son, if any
 (Contd)

 (q) retirement means termination of the service of an

employee otherwise than on superannuation

 (r) superannuation
 in relation to an employee, means the attainment by the
employee of such age as is fixed in the contract or

 conditions of service as the age on the attainment of which the

employee shall vacate the employment
uninterrupted service

 Including service which may be interrupted on

account of sickness ,

 accident , leave , absence from duty with leave

cessation of work not due to the fault of the

employee.
The number of days on which an employee has actually worked
under an employer shall include the days on which–
(i) he has been laid-off under an agreement

(ii) he has been on leave with full wages, earned in the previous
year;

(iii) he has been absent due to temporary disablement caused by

accident arising out of and in the course of his employment; and

iv) in the case of a female, she has been on maternity leave; so,
however, that the total period of such maternity leave does not
exceed twelve weeks.
 Section 2 A continued
Calculation of Continuous Service

 Employee has actually worked for 190 days in case the

employee is employed below the ground in a mine or

 in an establishment which works for less than 6 days a

week

 240 days in any other case

where an employee, employed in a seasonal establishment

shall be deemed to be in continuous service under the employer

for such period if he has actually worked for not less than
seventy-five per cent of the number of days on which the
establishment was in operation during such period
 Gratuity shall be payable to an employee on the
termination of his employment after he has rendered
continuous service for not less than five years
 (a) on his superannuation, or
 (b) on his retirement or resignation, or
 (c) on his death or disablement due to accident or disease:
 Provided that the completion of continuous service of five years
shall not be necessary where the termination of the employment
of any employee is due to death or disablement

In case of death of the employee, gratuity payable to him shall be

paid to his nominee
 For every completed year of service the employer shall
pay gratuity to an employee at the rate of fifteen days'
wages based on the rate of wages last drawn by the
employee concerned

 In the case of a piece-rated employee, daily wages shall

be computed on the average of the total wages received
by him for a period of three months immediately
preceding the termination of his employment, and

 for this purpose, the wages paid for any overtime work
shall not be taken into account
 Computing the gratuity payable to an employee who is
employed, after his disablement, on reduced wages:
 his wages for the period preceding his disablement shall be
taken to be the wages received by him during that period, and

 his wages for the period subsequent to his disablement shall be

taken to be the wages as so reduced.
 Gratuity of an employee, whose services have been
terminated due to wilful omission or negligence
 causing any damage or loss to, or destruction of property

 belonging to the employer

 shall be forfeited to the extent of the damage or loss so

caused;
 Gratuity payable to an employee may be wholly or
partially forfeited

 (i) if the services of such employee have been terminated

for his riotous or disorderly conduct or any other act
violence on his part, or

 (ii) if the services of such employee have been terminated

for any act which constitutes an offence involving moral
turpitude, provided that such offence is committed by
him in the course of his employment
 Bharath Gold Mines Ltd. Regional Labour Commissioner
Workmen was guilty of theft committed during the course of
employment. Held: His gratuity can be deducted on the ground
of offence involving moral turpitude.

 Bakshish Singh v. M/s Darshan Engineering Works

Payment of gratuity under this is one of the minimum service
condition which must be made available to the employees
regardless of the financial capacity of the employer to carry on
the business.
  DTC retired Employers Association and Others v.
Delhi Transport Corpn. and Other
Gratuity is essentially a retiring benfit payable to a workman
which as per the statute has been made payable on
voluntary resignation as well. Gratuity is a reward for
good, efficient and faithful service rendered for a
considerable period.
  Union of India v. All India Services Pensioners
Association
Distinction between Pension payable on retirement and
gratuity payable on retirement

Held: Pension is payable periodically as long as the

pensioner is alive. Gratuity is paid only once on
retirement.
 Every employer other than under the control of the Appropriate
Government will obtain an Insurance for his liability to pay towards
gratuity from LIC of India
 Exempt those employers who already have approved gratuity fund in
respect of his employees, employers employing 500 or more persons
 Every employer will get his establishment registered with the
Controlling Authority
 Employer fails to make the payment by way of premium or towards
gratuity fund
 Liable upto the extent of gratuity payable plus interest
 If any employer contravenes above provision, punishment : Fine upto Rs.
10,000
 Each employee who has completed One year of service give a
name of a nominee

 More than one nominee

 Name can only be of family member

 If no family, any person

 Name of nominee can be modified by written notice

 Nominee predecease, fresh nomination

 Every nomination to be notified to the employer

 Written application can be made by:
 Employee himself

 Nominee

 Person authorized in writing by the employee

 Employer will determine the gratuity and give notice to the

person to whom gratuity is payable and the Controlling
authority

 Employer shall arrange to pay gratuity within 30 days from the

date on which it becomes payable
 Interest paid if gratuity not paid on time

 If there is any dispute related to gratuity

 Employer shall deposit gratuity amount with the Controlling authority
 If there is a dispute
 Employer or employee raise the dispute and make an application to the
controlling authority
 After due inquiry &
 After giving parties a reasonable opportunity of being heard,
determine the matter
 For the purpose of inquiry, controlling authority have the same
powers as a Civil Court
 Appeal within sixty days to Appropriate Government
 Confirm, reverse or modify the decision
 Inspector
 Appointed by the Appropriate Government
 Public servant

 Powers of Inspectors
 Enter & inspect
 Examine records
 Require an employer to furnish record
 Make copies and abstracts
 If the employer fails to pay the gratuity within
30 days of termination of employment,
 Controlling Authority is empowered to issue a certificate
to the Collector to recover the amount of Gratuity
 The employer shall also be liable to pay interest
 The interest shall be paid from the date of expiry of the
prescribed period & ending with actual date of payment
of Gratuity
 OFFENCE PENALTY

Knowingly makes 6 months imprisonment or

Rs 10,000 or both
or causes to make
false statement to
avoid payment
3 months- 1 year
Default in complying
imprisonment or Rs
with Act
20,000 or both

Non-payment of 6 months-2 yrs

Gratuity imprisonment