The Payment of Gratuity

Act, 1972

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:

For Every
completed Year of Service in excess of Six Months

Monthly rate of wage last

drawn X 15
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.

Nominations
To be made after completion of 1 years service. Form F
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 (Form G), 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. Form H
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.

Penalties
OFFENCE

PENALTY

False statements to
avoid payment

6mts imprisonment
or Rs.10,000 or both

Default in complying
with Act

3mts 1yr
imprisonment or
Rs.20,000 or both

Non-payment of
Gratuity

6mts 2yr
imprisonment

~ The End ~