The Payment of Gratuity Act, 1972

The Payment of Gratuity
Act, 1972
At a Glance…
Applicability
• Every 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 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
Basic + DA X 15 X No. of year of service / 26

Mode 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.3,50,000

Determination, application and
notice 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.
Determination, application and
notice for payment of gratuity
• 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.

Gratuity 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.
Gratuity Disputes
Appeal
• The appeal is made by the person aggrieved by

order of Controlling Authority.
• Limitation – 60 days from the date of receipt of

order which is further extended to 60 days more
on sufficient cause.
• Appeal is not maintable if certificate of claimed

gratuity amount issued by Controlling Authority is
not produced
Dispute as to Gratuity
Appeal Procedure
Necessary entry is made in the

record on receipt of decision of
appellate authority.
Notice is issued to employer to

direct him to make payment of
gratuity to the applicant within 15
days of receipt of notice.
Forfeiture of Gratuity
• If service is terminated by any act, willful

omission, negligence causing damage or
destruction of property, forfeiture is to the
extent of damage.
• Wholly or partially forfeited

– If termination is due to riotous or
disorderly conduct or violence on
employees part.
– For offence involving moral turpitude
in course of employment.
Recovery of Gratuity
• If the amount of gratuity payable under this Act is not paid
by the employer, within the prescribed time, to the person
entitled thereto,
– the controlling authority shall, on application made to it,

issue a certificate for that amount to the Collector, who
shall recover the same, together with compound interest
thereon at such rate as the Central Government may
specify, from the date of expiry of the prescribed time, as
arrears of land revenue and pay the same to the person
entitled thereto.
• Provided that the controlling authority shall, before issuing a

certificate under this section, give the employer a reasonable
opportunity of showing cause against the issue of such
certificate
• The amount of interest payable shall, in no case exceed the

amount of gratuity payable under this Act.
Exemption of Gratuity
Appropriate Govt. may grant exemption
To Whom: to Establishment, factory, etc

and employee or class of employees
employed in any establishment, factory,
etc…
When: if they are in receipt of gratuity or

pensionary benefits not less favorable than
the Act.
Nominations
• To be made after completion of 1 years service.
• 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, 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.
• 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.
Cognizance of offence
• No court shall take cognizance of any offence punishable

under this Act save on a complaint made by or under the
authority of the appropriate Government.
• Gratuity, if not been paid, or recovered, within 6 months

from the expiry of the prescribed time, the appropriate
Government shall authorize the controlling authority to
make a complaint against the employer, whereupon the
controlling authority shall, within 15 days from the date
of such authorization.
• No court inferior to that of a Metropolitan Magistrate or a

Judicial Magistrate of the first class shall try any offence
punishable under this Act.
Penalties
OFFENCE PENALTY
False statements to 6mts imprisonment or

avoid payment Rs.10,000 or both
3mts – 1yr
Default in complying
imprisonment or
with Act
Rs.20,000 or both
6mts – 2yr
Non-payment of Gratuity
imprisonment
~ The End ~

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The Payment of Gratuity

• Every factory, mine, oil plantation, port and

• Every shop or establishment – if it employs

• To any other establishment – employing 10

Gratuity is payable if there is :-

– Continuous service of 5yrs (not necessary incase of

Basic + DA X 15 X No. of year of service / 26

•In cash or DD or bank cheque

Maximum amount payable is Rs.3,50,000

• Person eligible has to make a written application

• Incase of death, the legal heir must make

• Within 15 days of receipt of application, employer

No interest if delay is due to employees fault.

• Controlling Authority shall make due inquiries and if

claim is found admissible, direct payment is

• Such issue of direct payment must be made to

• The appeal is made by the person aggrieved by

• Limitation – 60 days from the date of receipt of

• Appeal is not maintable if certificate of claimed

Necessary entry is made in the

Notice is issued to employer to

• If service is terminated by any act, willful

• Wholly or partially forfeited

– the controlling authority shall, on application made to it,

• Provided that the controlling authority shall, before issuing a

• The amount of interest payable shall, in no case exceed the

To Whom: to Establishment, factory, etc

When: if they are in receipt of gratuity or

• An employee may in his nomination, distribute the amount of gratuity

• If an employee has a family at the time of nomination, the

• If at the time of making a nomination the employee has no family, the

• A nomination may, be modified by an employee at any time, after

• Every nomination, fresh nomination or alteration of nomination, as the

• No court shall take cognizance of any offence punishable

• Gratuity, if not been paid, or recovered, within 6 months

• No court inferior to that of a Metropolitan Magistrate or a

False statements to 6mts imprisonment or

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