Payment of Gratuity Act, 1972

PREAMBLE

The Act provides for the payment of gratuity to workers employed in every factory, shop & establishments or educational institution employing 10 or more persons on any day of the proceeding 12 months. A shop or establishment to which the Act has become applicable shall continue to be governed by the Act even if the number of persons employed falls bellow 10 at any subsequent stage.

All the employees irrespective of status or salary are entitled to the payment of gratuity on completion of 5 years of service. In case of death or disablement there is no minimum eligibility period. The amount of gratuity payable shall be at the rate of 15 days wages based on the rate of wages last drawn, for every completed year of service. The maximum amount of gratuity payable is Rs. 3,50,000/-.

Formula is - Last Wages *15*No. of services/26

NOMINATION

Each employee is required to nominate one or more member of his family, as defined in the Act, who will receive the gratuity in the event of the death of the employee.

ADMINISTRATIVE MACHINERY

All the Assistant Labour Commissioners and Labour Officers in the Labour Department have been appointed Controlling Authority and all the Deputy Labour Commissioners have been appointed Appellate Authority under the Act.

RESPONSIBILITY OF THE EMPLOYERS

It is the duty of the employer to determine the amount of gratuity as soon as it becomes payable and to give notice of the same to the person to whom gratuity is payable and also to the Controlling Authority. The employer shall also provide to pay the amount of gratuity to the person to whom it is payable. Failure to do so shall render him liable to pay the interest at the prevailing rate from time taken.

In case the employee is not paid the due amount of gratuity he should apply, ordinarily within thirty days, in Form-I to the employer. Is an employer fails to pay due gratuity even after the receipt of notice in Form-1, the claimant employee or his nominee or legal heir, may within ninety days of the occurrence of the case for the application, should apply in Form-IV, to the Controlling Authority for issuing direction to the employer. After conducting the enquiry as prescribed, the Controlling Authority will determine the amount payable and direct the employer to make the payment. If the employer fails to comply with the direction the Controlling Authority can direct the Collector to recover the amount due and pay to the applicant.