The Payment of Gratuity Act, 1972.

 
APPLICABILITY

The Act is applicable to: -
Every shop or establishment in which ten or more persons are employed

Contingency in which the employer has to pay gratuity to his employees

The employer has to pay gratuity to his employees:-
(a) When the service of the employee is terminated on superannuation; or
(b) When the employee retires or resigns from service; or
• When the employee dies while in service; or
• When the service of the employee is terminated on his disablement due to accident or disease.

Minimum length of service required for earning gratuity
In order to earn gratuity the employee has to render minimum five years' service.

BASIS OF WAGES TO FOR CALCULATION OF GRATUITY
Gratuity is payable on the basis of all emoluments earned by the employee, i.e. basic wages plus dearness allowance.

RATE OF GRATUITY
Gratuity is payable to the employee at the rate of 15 days' wages for every completed year of service or part thereof in excess of six months; based on the rate of his last drawn wages. In the case of monthly rated employee, the rate of one day's wages is to be computed by dividing the monthly wages by 26 working days.

MAXIMUM AMOUNT OF GRATUITY
The maximum amount of gratuity the employee can get is rupees Ten Lakhs.

Claim for gratuity
Obligations of the employer in respect of the employee's claim for payment of gratuity

(a) As soon as gratuity becomes payable to the employee, the employer has to determine the amount of gratuity and inform the employee as well as the Controlling Authority about it in writing. He shall pay the amount of gratuity within thirty days.
(b) If the employer receives an application from the employee and accepts his claim, the employer has to inform the employee in Form L about the amount of gratuity and the proposed date of payment thereof, within 15 days of the receipt of the application.
(c) If the employer does not accept the claim of the employee, he has to inform the employee in Form M about the reason why the claim is not accepted by him, within 15 days of the receipt of the application.
(d) The employer has to pay the amount of gratuity in cash or, if so desired by the employee, by Demand Draft or Bank Cheque. If the employee so desires and the amount is less than Rs. 1,000, payment may be made by postal money order after deducting the postal money order commission thereof from the amount.

Procedure to follow for claiming gratuity from the employer

(a) The employee who is eligible for payment of gratuity has to send a written application to the employer in Form I within 30 days from the date gratuity becomes payable.
(b) If the employer does not take any action on the application, the employee has to apply to the Controlling Authority in Form N within 90 days of the occurrence of the cause for the application for issuing necessary direction to the employer for making payment of gratuity.
• If the employee is aggrieved by the order of the Controlling Authority, he can prefer an appeal to the Appellate Authority within 60 days from the date of the receipt of the order.
• If the amount of gratuity is not paid by the employer, in spite of the order of the Controlling Authority or the Appellate Authority as the case may be, the employee has to apply to the Controlling Authority in Form T for recovery thereof through the Collector as arrears of land revenue.

Offences under the Act and punishment

(1) If any person, for the purpose of avoiding any payment to be made under the Act, knowingly makes or causes to be made any false statement or false representation he would be punished with imprisonment upto 6 months, or with fine upto Rs. 10,000 or, with both.

(2) If any employer contravenes, or makes default in complying with any provisions of the Act or any rule or order made thereunder, he would be punished with imprisonment upto 1 year, or with fine upto Rs. 20,000, or with both.

To display an abstract of the Act in the establishment

Every employer must display an abstract of the Act and the Rules made thereunder in English and in the language understood by the majority of the employees at a conspicuous place at or near the main entrance of the establishment.