Payment Of Gratuity

Act, 1972

by:

Nishtha
Sharma
Puja
Mittal

Ritika Khanna

Shivangi Verma
 Gratuity
 A kind of retirement benefit.
 It is a payment that is intended to
help an employee after his
retirement.
 General principle - for faithful
service over a long period the
employee is entitled to claim a
certain amount as retirement
benefit.

 Enactment of
Payment of Gratuity
Act {1972}
 Proposal for enactment was
discussed in:
• Labour Minister’s Conference

{Aug 24 & 25}

• Indian Labour Conference {Oct

22 & 23}

 A bill was passed as the Payment Of

 Definitions
 “Appropriate Govt.”
• In relation to an establishment:
a) Belonging to, or under the control
of Central Government.
b) Having branches in more than one
state.
c) Of a major port, mine, oilfield or
railway company, the Central Govt.
• In any other case, the State
Government.
 Scope And
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:
• Persons who hold civil Posts under

the Central Government or State

 Payment of
Gratuity
It is a payment that is intended to
help an employee after his
retirement whether the retirement is
due to super-annuation or due to
some physical disability.
Formula Of Gratuity =(Last Month Wages
*15*No. of Services)/26
Payment of Gratuity
1. Gratuity should be paid to an
employee on the termination of his
employment after he has rendered
service for not less than 5 yrs -
 on his super-annuation
 his retirement
 his resignation
 on his death or disablement due to
disease or accident
Payment of Gratuity
Condition:-
 Completion of continuous services of
five years is not necessary when the
termination of employee is due to
death of disablement.
 In case of death of employee gratuity
payable to him is paid to his nominee.
2. For every completed year of service or
part, the employer shall pay gratuity to
the employee at the rate of fifteen days
Payment of Gratuity
3. The amount of gratuity payable
to an employee shall not exceed
three lakhs and fifty thousand
rupees.
4. Nothing in this section shall
affect the right of an employee to
receive better terms of gratuity
under any award or agreement or
contract with the employer.
 Nomination
1. If an employee has a family at the
time of making a nomination, the
nomination shall be made in favor
of one or more member of his
family .
2. If any nomination is made by an
employee in favor of a person
who is not the member of his
family, shall be void.
 Nomination
4. If the employee acquires a family
after making a nomination then
such nomination become invalid,
and a fresh nomination is made in
favor of a family member.
5. Every nomination , fresh
nomination or alternation of
nomination shall be sent by the
 Determination of the
Amount of Gratuity
(Sec.7)
•Application for
gratuity[sec7(1)]:
An employee who is eligible for
payment of gratuity can give an
application in writing to the
employer within 30 days from the
date the gratuity becomes
payable.
.
 Determination of the
Amount of Gratuity
(Sec.7)
 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 of Gratuity
(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
 Inspectors(Sec.7A)

 Appointed by the Government for

the purpose of this act.
 Two or more inspector can be
appoint for the same area.
 Every Inspector shall be deemed to
be a public servant within the
meaning of section 21, of the Indian
Penal Code, 1860.
 Powers of the
Inspectors(Sec 7B)

 Ask for any information from the

employer.
 Examining any register, record or
notice or other documents.
 Search and seize register, record,
notice or other document in respect
of offence;
 Recovery of
Gratuity(Sec 8)
 Controlling authority issued
certificate to the collector on behalf
of aggrieved party.
 Collector recover the amount
together with compound interest.
 Amount of interest should not
exceed the amount of gratuity.
 Penalties
(1) Whoever, for the purpose of avoiding any
payment to be made by himself under this
Act or of enabling any other person to
avoid such payment, knowingly makes or
causes to be made any false statement or
false representation shall be punishable
with imprisonment for a term which may
 Penalties
2) An employer who contravenes, or
makes default in complying with, any
of the provisions of this Act or any
rule or order made there under shall
be punishable with imprisonment for
a term which shall not be less than
three months but which may extend
to one year, or with fine which shall
 Exemption of employer
from liability
In certain cases
 Where an employer is charged with an
offence punishable under this Act, he shall
be entitled, upon complaint duly made by
him and on giving to the complainant not
less than three clear days notice in writing
of his intention to do so, to have any other
person whom he charges as the actual
offender brought before the court at the
time appointed for hearing the charge;
 Protection Of
Gratuity
 No gratuity payable under this Act
and no gratuity payable to an
employee employed in any
establishment, factory, mine,
oilfield, plantation, port, railway
company or shop exempted under
section shall be liable to attach­
ment in execution of any decree or
order of any civil, revenue or
 Power to make
rules.
 The appropriate Government may,
by notification make rules for the
purpose of carrying out the
provisions of this Act.
 Every rule made by the Central
Government under this Act shall be
laid, as soon as may be after it is
made, before each House of
Parliament while it is in session.
Thank you