Payment of Gratuity Act, 1972

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HomeBrud.gifIndian LawBrud.gifIndian ActsBrud.gifPayment of Gratuity Act, 1972

The Payment of Gratuity Act is a small Indian Act with 15 sections. It is a part of various Acts that come under Industrial Law and was introduced to provide social security to the workmen.

Contents

Notes

  • This Act was introduced in 1972 and was amended in 1984 and 1987.
  • This Act has no schedules.
  • Central Government enacted the Payment of Gratuity (Central) Rules 1972. Andhra Pradesh State Government has enacted the Act as Andhra Pradesh Payment of Gratuity Rules 1972
  • Gratitude is defined as something given without obligation or claim.
  • Article 43 of Constitution of India says that the State should work towards securing to all workers, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities
  • Preamble: An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oil-fields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
  • Supreme Court said: Gratuity is a kind of retirement benefit like the provident fund or pension. Intended to help them after retirement, whether the retirement is the result of superannuation or physical disability. General principal behind Gratuity is that the length of the service of the workmen are to be considered to claim a certain amount as a retiral benefit.
  • Applies to:
    • 1. Every factory, mine, oil-field, plantation, port and railway company;
    • 2. Shops or establishment with ten or more persons employed on any day in the preceding 12 months;
    • 3. Such Shops or establishment with ten or more persons employed on any day in the preceding 12 months as identified by Central Government by notification;
    • Applies to the whole of India except to Jammu & Kashmir in so far as to plantations or ports.
  • 'Not less than 5 years of continuous service' is relaxed for cases of death or disablement
  • Superannuation: The age at which the employee shall vacate the employment; As specified in the employment contract or conditions of service; Generally 58 years or 60 years. Gratuity is payable only after completion of the service period.
  • Retirement means dismissal or removal (termination) from service other than by way of superannuation.
  • Resignation is when employee resigns his job with his pleasure. Forced resignation is equal to dismissal. Resignation comes into effect after employer accepts it after considering the facts and Standing Order provisions. Once accepted by the employer, resignation cannot be withdrawn by the employee.
  • Calculating Gratuity:
    • 15 day average pay = (Total Salary for the month / 26 working days of the month) * 15 days
    • Total Gratuity payment amount = 15 day average pay * total years in service
  • Total years in service should be calculated for every completed year of service or part thereof in excess of six-months
  • For piece-rated employee, average is calculated on total wages received by him for the period of three months immediately, preceding, the termination of employment
  • For seasonal employees, average is calculated based on 15-day wages for each season
  • Overtime wages shall not be taken into account
  • Kerala High Court and Supreme Court said: wages are payable 'for 15 days' and not 'during a period of 15 days'
  • If a disabled worker is moved to a less-wage employment on humanitarian basis, he gets gratuity at two rates for calculated based on each of the employment period
  • Supreme Courtsaid that while calculating gratuity, the monthly wage should be considered as for 26 days and not 30 days

Sections in the Act

An Act to provide for a Scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.

  • Section 1: Short title, extent, application and commencement
  • Section 2: Definitions
  • Section 3: Controlling authority
  • Section 4: Payment of gratuity
  • Section 4A: Compulsory insurance
  • Section 5: Power to exempt
  • Section 6: Nomination
  • Section 7: Determination of the amount of gratuity
  • Section 8: Recovery of gratuity
  • Section 9: Penalties
  • Section 10: Exemption of employer from liability in certain cases
  • Section 11: Cognizance of offences
  • Section 12: Protection of action taken in good faith
  • Section 13: Protection of gratuity
  • Section 14: Act to override other enactments, etc
  • Section 15: Power to make rules

Related Rules

Related Acts

Related Sections from other acts


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