an brief of Gratuity Act

2. • Latin word – Gratuitous
• Gratuity means a lump sum payment made by an
employer as the retrial reward for his past service when
his employment is terminated

3.  Retiring benefit-Long and Unblemished
service

4. except
 Shop and establishment covered under SHOPS AND
ESTABLISHMENT ACT- 10 or more persons - immediately
preceding to 12 months.
 Once this act applies – continue to be governed –
irrespective of no of persons
 It shall come into force on such date as the central government
may by notification , appoint

5.  Employee does not include- holds post under central
or state government
 Teacher cannot be called as employee due to amendment
of this act

6.  Continuous Service” means uninterrupted service
which may be interrupted on account of sickness ,
accident , leave , absence from duty without leave(not
being treated as break in service),lay-off , strike , lock-
out or cessation of work not due to the fault of the
employee.
 Whether such uninterrupted or interrupted service
was rendered before or after the commencement of the
Act

7.  If an employee is not in continuous service within the meaning
of CLASS-1 he shall deemed to be in continuous service.
For a period of 1 year :
 190 Days, if the employee was employed below the
ground in a mine
 190 Days ,if the employee was employed in an
establishment which works for less than 6 days in a week
 240 Days, in any other case

8. For a period of 6 months :
 95 Days , if the employee was employed below
the ground in a mine
 95 Days , If the employee was employed in an
establishment which works for less than 6 days in a
week
 120 Days , In any other case

9. Gratuity is payable when there is :-
 Continuous service of 5 yrs(not necessary incase of death or
disablement)
 Incase of death ,the amount shall be paid to nominee or legal heir
 Time limit- Within 30 days of gratuity becoming payable
 Maximum Amount-The gratuity payable to an employee shall not
exceed Rs. 10,00,000

10.  It is mandatory where number of employees is more
than 500
 The registration shall be done in prescribed time & in
prescribed manner
 The insurance shall be taken from LIC or any other
prescribed insurance company
 However , employer of an establishment belonging to
or under the control of CG or SG are exempted from the
operations of sec.4A.

11.  Every employee, who has completed 1 yr of service , is
compulsorily required to make a nomination (Form F)
 The nomination must be made within 30 days

12. The nomination must be made in favor of one or
more members of the family(nomination shall be void
if it is made in favor of a person who is not a member
of his family)
If at the time of making nomination, the employee
does not have family, the nomination may be made in
favor of any person
The employee may distribute the amount of gratuity
amongst more than one nominee

13.  Application can be made by :-
• An employee who is eligible for payment of gratuity
• Any person authorized in writing by such employee
• Nominee of the employee(if the deceased employee
had made a nomination)
• Legal heir of the employee(if the deceased employee
had not made any nomination)

14.  If the employer fails to pay the gratuity within the prescribed
time (i.e., within 30 days of termination of employment) , the
controlling authority is empowered to issue a certificate to the
collector to recover the amount of Gratuity
 The employer shall also be liable to pay Compound interest
at such rate as may be notified by CG from time to time
 The interest shall be paid from the date of expiry of the prescribed
period& ending with actual date of payment of Gratuity
 The interest payable shall not exceed the amount of gratuity
payable

15. OFFENCE PENALTY
False statement to 6 months imprisonment or
avoid payment Rs 10,000 or both
3 months-1 yr
Default in complying
imprisonment or Rs 20,000
with Act
or both
Non-payment of 6 months-2 yrs
Gratuity imprisonment

16.  Monthly Rated Employee
 Piece rated employee
 Employee of a Seasonal Establishment

17. • Last drawn wages x 15/26 x Completed years of Service
(incl. a part of year in excess of 6 months)
NOTE:
• Wages = Last drawn
• Month = Period of 26 Days
• 15 days wages = Last drawn wages x 15/26

18. • Last drawn wages x 15/26 x Completed years of
Service(incl. a part of year in excess of 6 months)
NOTE:
• Last drawn wages = Total wages received during 3 months
immediately preceding termination/Days actually worked
• Last drawn wages shall not include overtime wages

19. • Such an employee shall be paid gratuity at the
rate of 7 days wages for each season