The Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972
INTRODUCTION
Gratuity means gifts or service often in return of favors and services. In the present context, it means, a sum of money paid to an employee at the end of employment. Gratuity in case of retirement, superannuation or death helps family to adjust in a new situation in which income ceases partially or completely. Gratuity Schemes, serves as an important tool of social security.
HISTORICAL BACKGROUND
In the earlier days gratuity schemes were introduced in some establishments either voluntarily by employers or under agreements between employers and workers. However these schemes were very narrow in their scope and were applicable only to some establishments and therein few certain categories. A central act, namely, The Payment Of Gratuity Act, 1972, was enacted and came into force on the 16th September,1972.
If the provisions of the Act become applicable to a shop or establishment once, the Act shall continue to apply to such shop or establishment even if the no. of employees falls below 10 at any time in the future.
2. DEFINATIONS
(a)
(b)
(c) (d) (e) (f) (g) (h)
Appropriate government Completed years of service Continuous service Controlling authority Employee Employer Factory Family
2. DEFINATIONS (CONTINUED...)
(i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908); (j) "mine" has the meaning assigned to it in clause (J) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952); (k) notification (l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948); (m) "plantation" has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951) ;
2. DEFINATIONS (CONTINUED...)
(n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908); (o) "prescribed" means prescribed by rules made under this Act; (p) "railway company" has the meaning assigned to it in clause (5) of section 3 of the Indian Railways Act,1890 (9 of 1890); (q) "retirement" means termination of the service of an employee otherwise than on superannuation; (r) superannuation (s) wages
An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absent in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
The number of days for which an employee has actually worked under an employer shall include the days on whichhe has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment; he has been on leave with full wages, earned in the previous year; he has been absent due to temporary disablement caused by an accident arising out of and in the course of employment; in the case of a female, she has been on maternity leave; so that the total period of such maternity leave does not exceed twelve weeks.
Where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months. He shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than 75% of the number of days on which the establishment was in operation during such period.
3. Controlling Authority
The appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different controlling authorities may be appointed for different areas.
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 the case of death of the employee, gratuity payable to him shall be paid to His Nominee, or If no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the
share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.
For every completed year of service or part thereof in excess of six months, 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. Provided that 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.
Payment of Gratuity(cont..)
Provided further that in the case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season.
CALCULATING FORMULA
FIFTEEN DAYS WAGE= (MONTHLY RATE OF WAGES LAST DRAWN BY HIM / 26) * 15
For the purpose of 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. 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.
Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee, whose services have been terminated for any act, willful 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.
terminated for his riotous or disorderly conduct or any other act of violence on his part, or
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.
Compulsory Insurance(cont..)
(2)The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1).
5. Power to Exempt
(1)The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.
Power to Exempt(cont..)
(2)The appropriate Government may, by notification and subject to such conditions as may be specified in the notification, exempt any employee or class of employees employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act, if, in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.
Power to Exempt(cont..)
(3) A notification issued under sub-section (1) or sub-section (2) may be issued retrospectively a date not earlier than the date of commencement of this Act, but no such notification shall be issued so as to prejudicially affect the interests of any person.