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It depends on two factors:
First, he should be employed in the establishment in which the act
applies according to sec.1(3):
- Every factory, Mine, oilfield, plantation, port and railway company;
- Every industry or establishment within the meaning of law, in
relation of shops and establishment of state, in which 10 or more
people employed or were employed or people on any day of
preceding 12 months;
- As per the notification of central govt. in this behalf.
Secondly, he should be employee as per sec.2(e):
Employees means any person (other than apprentice) employed
on wages on the establishment to do any skilled, semiskilled,
unskilled, manual or supervisory, technical or clerical work. And
now with new amendment, the definition has been broad based as
to include any person, employed to do any kind of work. Thus
the definition includes a teacher as an employee under the Act.
According to sec. 4(1) of this act, Gratuity is paid
to employees after rendering continuous service
of 5 years:
- on his superannuation;
- on his retirement or termination;
- on his death or disablement due to accident or
Section 2(a) of The Payment of Gratuity Act defines as:
A workman shall be said to be in continuous service for a period if he
is, for that period, in uninterrupted service, including service which
may be interrupted on account of sickness or authorized leave or an
accident or a strike, which is not illegal, or a lock-out or on account of
non-employment or discharge of such workman for a period which
does not exceed three months and during which period a substitute
has been employed in his place by the employer, or a cessation of
work which is not due to any fault on the part of the workman.
This means it includes all approved leaves, legal strike, weekly off
everything. It does not mean that you have to be present in the office
for whole 365 days in a year.
Madras High Court judgment in the case of Mettur Beardsell Ltd. V/s
Regional Labor Commissioner (central) Madras and Others. In this
judgment, the Madras High Court declared that if an employee has
completed 4 years 10 months and 18 days service without break i.e. 240
days, it should be considered as completed 5 years under section 2(a), 2(b),
2(c) and 2(e) of the Payment of Gratuity Act.
Even honorable Supreme Court of India had given similar judgment. by
virtue of the judgment of Supreme Court rendered under the provisions of
the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt.
Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee
has a service of 240 days in the preceding 12 months and it is not necessary
that he should have completed one whole year’s service. As the definition of
continuous service in Industrial Dispute Act and Payment of Gratuity Act are
synonymous, the same principal can be adopted under the act also and
hence an employee rendering service of 4 year 10 months 18 days is
considered to have completed 5 years continuous service under sec.4(2)
and thereby is eligible for gratuity."
normally to employees
in case of death to his nominees
** in case of no nomination has made, or
been made is minor , then controlling
authority will deposit this money in the
bank account for the benefits of minor
monthly salary x 15 days x no. of years of service completed
Maximum salary payable under the gratuity act is Rs. 10,00,000/sec.4(3).
* Mode of payment of gratuity:
- in cash or
- demand draft or
- bank cheque
- payment by postal money order if amount is less than Rs. 1000/- if
As soon as the Gratuity Act become applicable, you should inform
to the controlling authority i.e. to The Labor Commissioner office under
whose jurisdiction your office falls in Form A.
Any changes in company's particular: The Employer must submit a
Notice in Form ‘B’ to the Controlling Authority i.e. to labor commissioner of
the area within 30 days of any change in the name, address, employer or
nature of business. Employer means Directors of the company.
Display of extract of the rules/ Act: you must display extract of the Act
near the main entrance of the company. I know it is difficult for a modern
organization specially MNC, please make it available on intranet site, so
employee can access it. It should be in English and in local language
understood by majority of the employee .
Notice of closure of establishment: Even if you wish to close your
organization, a notice under form C must be given to the controlling
authority i.e. assistant commissioner of labor/ commissioner of labor’s
office. Basically, this provision is made for safeguarding employees and to
ensure all those who are eligible for Gratuity gets their amount before
closure of the company.
Nomination: Please ensure that your all employees have given Nomination
under payment of Gratuity Act. If not, circulate nomination form to all
employees, ask them to fill it and submit it. Give them one copy back. It is
very essential. It is also mandatory to keep all the nomination form in safe
custody. Please keep them in employee's HR file or any other place from
where it can be produced as and when required. Form F.
Informing employee and controlling authority about gratuity amount
payable: As and when Gratuity amount is payable, the calculation should
be shown to employee as well as to The Controlling Authority.
Person eligible has to make an application to employer within 30
days when it fell due;
In case of death, legal heir should make an application within 1 year
from the gratuity become payable;
As soon as gratuity become payable, employer must determine the
gratuity even before application is made and must send the notice to
the person to whom it is applicable;
Within 15 days of receiving of application, employer shall:
- If claim is admissible, send notice within 30 days
- If claim is inadmissible, send notice on form ‘M’
- To be paid within 30 days from the date it becomes applicable
- If not paid within 30 days, simple interest from the payable date to
No interest if delay is due to employees fault.
Submit Application in form I by employee or Application
in form J by nominee (If employee is not alive) or
Application in form K by legal heir (if employee is not
Submit the application to the employer within 30
days from the date of it becomes payable. The
employer shall pay the gratuity within 30 days from
the receipt of the application. For belated payment
the employer is liable to pay 10% simple interest
In case of any disputes w.r.t gratuity, the amount must be deposited
with the controlling authority and application must be made to
authority for direction within 90 days of occurrence in form N;
Controlling authority shall make inquiries and if claim is found
admissible, direct payment is made to the person entitled;
Such issue of direct payment to employer within 30 days from the
date of receipt of the same by the employer;
The appeal is made by the person who is aggrieved by the order of
Limitation- 60 days from the date of receipt of order which is further
extended to 60 days more on sufficient causes;
Gujarat vs. Dr.R on 30 August, 2011
Appeal is not maintainable if certificate of claiming gratuity amount
issued by controlling authority is not maintainable.
Necessary entry is made in the record on receipt of
decision of appellate authority
Notice is issued to employer to direct him to make
payment of gratuity to employee within 15 days of receipt
act deal with issue in 2 parts:
Section 4(6)(a): employee whose service have been terminated for
the act of willful omission or negligence causing any damages or
loss or destruction of property belonging to employer, gratuity shall
be forfeited extent of damages. In absence of proof of extent of
damage, the right of forfeiture is not available.
Section 4(6)(b): employee have been terminated:
For riotous or disorderly conduct or any act of violence.
For act which constitute offence involving moral turpitude provided
that such offence committed by them in the course of his
If the amount of gratuity payable under this act is not paid by the
employer, within the prescribed time, to the person entitled thereto;
the controlling authority shall, on application made to it, issue a
certificate for that amount to the collector, who shall recover the
same, together with compound interest thereon as such rate as the
central govt. specify, from the date of expiry of prescribed time, as
arrear of land revenue and pay the same to the person entitles
Provided that controlling authority shall, before issuing a certificate
under this sec. give the employer a reasonable opportunity of
showing cause against the issue of such certificate.
The amount of interest payable shall , in no case exceed the
amount of gratuity payable under this act.
appropriate govt. may grant exemption:
To whom: to establishment, factory and
employee or class of employees employed
in any establishment, factory etc.
When: if they are receipt of gratuity or
pensionery benefits not less favorable than
To be made after completion of 1 year of service.
An employee may in his nomination, distribute the amount of gratuity
payable to him, under this act amongst more than one nominee.
If an employee has a family at the time of nomination, the nomination
shall be made in favor of one or more members of his family, and any
nomination made by such employee in favor of any person who is not
an family member ,will be void.
If at the time of making a nomination the employee has no family, the
nomination may be made in favor of any person but if the employee
subsequently acquires a family, such nomination will become void.
A nomination may, be modified by employee at any time, after giving a
written notice to his employer in such form and in such manner as
prescribed, of his intention to do so.
Every nomination, fresh nomination or alteration of nomination, as the
case may be, shall be sent by employee to his employer, who shall keep
the same in he safe custody.
No court shall take cognizance of offence punishable under this act
save on a complaint made by or under the authority of the
Gratuity if not paid or received, within 6 months from the expiry of
the prescribed time, the appropriate govt. shall authorize the
controlling authority to make a complaint against the employer,
whereupon controlling authority shall, within 15 days from the date of
No court inferior to that of the metropolitan magistrate or judicial
magistrate of the first class shall try any offence punishable under
• False statement to
• Default In complying
• Non-payment of gratuity
• 6 months imprisonment
or Rs. 10,000 or both
• 3months to 1 year
imprisonment or Rs.
20,000 or both
• 6 months to 2 years
Employer duty to determine and pay gratuity:
Section 7(2): lays down as soon as gratuity become payable the
employer shall, whether an application has been made or not,
determine the amount of gratuity and give notice in writing to the
person to whom gratuity is payable.
Section 7(3): employer shall pay the gratuity within 30 days from the
date it become payable.
Section 7(3A): under sub section, if gratuity is not paid within
specified period then gratuity becomes payable along with simple
interest at the rate of 10% p.a.
Section 7(4(e): if the disputes relates to the amount of gratuity
payable , the employer shall deposit the amount with controlling
authority such amount as he admits to be payable by him.
Application for payment of gratuity:
Section 7(1): person eligible to gratuity, to act on his behalf shall
send a written application on this behalf.
Rule 7: the payment of gratuity rules, 1972 provides that the
application shall be ordinarily made within 30days from the date of
gratuity becomes payable.
In case of superannuation or retirement of employee is known, the
employee may apply before 30 days of superannuation or
Rule 7(2): A nominee of employee is eligible for gratuity in case
death of employee shall apply within 30 days from the date it
becomes payable to him.