Payment of Gratuity Act, 1972

Applicability

  • Every factory, mine, oilfield, plantation, port and railway company,
  • Every shop or establishment, in which 10 or more persons are employed, or were employed, on any day of the preceding 12 months,
  • Such other establishments or class of establishments, in which 10 or more employees are employed, or were employed, on any day of the preceding 12 months.

A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below 10

Payment of gratuity

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,

  • on his superannuation, or
  • on his retirement or resignation, or
  • on his death or disablement due to accident or disease

The completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

Calculation of Gratuity

  • Monthly rate of wage last drawn x 15 / 26
  • Maximum amount payable is Rs. 10,00,000.

Exemption of Gratuity

Appropriate Government may grant exemption to establishment, factory etc, and employee or class of employees employed in any establishments, factory, etc, if they are in receipt of gratuity benefits more favorable than the Act.

Continuous service

An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, lay off, strike or a lock out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

To know more about labour laws.