The Payment of Gratuity Act, 1972 is a key piece of social security legislation in India that mandates the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railways, shops, or other establishments upon cessation of employment. The Act ensures a monetary benefit to employees as a reward for their long-term service to the employer.
Applicable to establishments employing 10 or more persons, the Act provides that gratuity shall be paid to an employee who has rendered continuous service of at least five years upon retirement, resignation, death, disability, or termination (except for disciplinary grounds). In the event of the employee's death, the gratuity is payable to the legal heirs or nominee.
The amount of gratuity is calculated as:
Gratuity = Last drawn salary × 15/26 × number of completed years of service
The Act lays down provisions relating to:
Eligibility criteria
Calculation and maximum ceiling
Nomination
Forfeiture
Compulsory insurance
Dispute resolution
and provides penalties for non-compliance.
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Object and scope of the Act
Historical background and need for gratuity legislation
Applicability and extent
Key definitions: Employee, Employer, Wages, Continuous Service, etc.
Eligibility criteria (5 years of continuous service)
When gratuity becomes payable
Exception to 5-year rule (death/disability)
Formula for gratuity payment
Definition of salary/wages for calculation
Rounding off and incomplete years
Maximum ceiling limit (e.g., ?20 lakh as per latest amendment)
Nomination process and updates
Time limits for payment
Manner of payment (cash, cheque, or bank transfer)
Interest on delayed payment
Situations under which gratuity may be wholly or partially forfeited
Wilful negligence, damage, disorderly conduct, or moral turpitude
Duty to determine and pay gratuity
Display of notice
Records and registers to be maintained
Compulsory insurance under the Act
Right to receive gratuity without delay
Right to appeal in case of denial or underpayment
Protection of gratuity from attachment under court orders
Controlling Authority
Procedure for inquiry and decision
Appellate Authority and appeal process
Recovery of gratuity dues as arrears of land revenue
Penalty for non-payment or delayed payment
False representation and obstruction
Cognizance of offences and prosecution procedure
Exempted establishments
Better terms under contract or award
Power to make rules and notify changes
| Commercial Payment of Gratuity Act, 1972 |
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