PAYMENT OF GRATUITY ACT, 1972 FQA's

1. What is gratuity?
Gratuity is a statutory payment to be made by an employer to an employee rendering five or more years of
continuous service in an establishment.

2. To which organization gratuity is applicable?

It applies to every factory, mine, oil field, plantation, port and railway company, every shop or establishment with
10 or more persons employed.

3. Who is eligible for gratuity ?

An employee on his termination of employment after he has rendered continuous service for not less than 5 years
a) on his superannuation or
b) on his retirement or his resignation or
c) on his death or disablement due to accident or disease. Completion of continuous service of 5 years is not
necessary where termination is due to death or disablement.

4. Whether the Act shall continue to be applicable to Shop or Establishment even after the prescribed number of
workmen has been reduced?
Yes. Once the Act becomes applicable, it shall continue to be applied not withstanding the number of persons
employed falls below ten.
5. Whether gratuity is applicable to seasonal employment?
The employer shall pay the gratuity at the rate of 7 days wages per each season.
6. What are the components of wages to be taken for calculation of gratuity?
All emoluments which are earned by an employee while on duty or on leave in accordance with the terms and
conditions of the employment and which are paid or payable to him in cash and includes dearness allowance but
does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
7. What is continuous service for calculation of gratuity?
Uninterrupted service, including service which maybe interrupted on account of sickness, accident, leave,
absence from duty without leave (not being absence in respect of which an order treating the absence as break
in service has been passed in accordance with the standing orders), lay-off, strike, or a lock-out or cessation of
work not due to any fault of the employee 190 days of actual work in a calendar year if the employee is employed
below the ground in a mine or 240 days in any other case. For the period of 6 months if an employee has actually
worked under the employer for not less than 95 days in a underground mine and 120 days in any other case. In
case of seasonal establishments if the employee has actually worked for not less than 75% of the number of
days on which the establishment was in operation.
8. To whom the worker has to be applied for gratuity?
The worker shall apply to the employer for payment of gratuity. If the employer does not pay the workman can
file his claim before the Controlling Authority under the Gratuity Act. The Asst. Commissioner of Labour is the
Controlling Authority under the Payment of Gratuity Act.
9. When the gratuity shall be payable for the employee ?(Sec.-4)
Within 30 days of termination of the employment of the employee.

10. How the gratuity is calculated ?

Basic wages + Dearness Allowance divided by 26 x 15 x no. of years of service.
11. What is the maximum amount of ceiling on payment of gratuity?
Rs.10 lacs.

12. Whether gratuity is payable to workman whose services are terminated on mis-conduct ?
Yes. However, gratuity may be wholly or partially forfeited if the services of an employee are terminated for his
riotous or disorderly conduct or any other act of violence on his part or any act which constitutes an offence
involving moral turpitude provided such offence is committed in the course of employment.
13. How to make an application before Controlling Authority ?

The application shall be filed before the Controlling Authority under the payment of Gratuity Act, 1972 in Form
N.

14. What is the time limit to pay the gratuity when it is payable ?

Within 30 days of termination of the employment of the employee.

15. What is the appeal time and who is the Appellate Authority?

The appeal time is 60 days from the date of receipt of the order of the Controlling Authority. The Dy.
Commissioner of Labour is the Apellate Authority u/s. 7 of the Payment of Gratuity Act.

16. How to recover the gratuity from the employer ?

The Gratuity shall be recoverable under the Revenue Recovery Act.

17 Can the amount of gratuity be attached in executing any decree or order of any Civil, Revenue or Criminal
court.?
No. No gratuity shall be liable to attachment in executing or any decree or order of any civil, revenue or criminal
court.

18. How to make nomination by the worker.?

The nomination shall be made in Form F by am employee who has completed one year of service and submit
to the employer.

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Competitive Exams Payment of Gratuity Act 1972 Describe the scope of payement of
gratuity act 1972, to who this entire act does not apply. How the forfeiture of gratuity is
applies to an employee. Scope of coverage Every factory (as defined in Factories Act),
mine, oilfield, plantation, port and railway. Every shop or establishment to which Shops
& Establishment Act of a State applies in which 10 or more persons are employed at
any time during the year end. Any establishment employing 10 or more persons as may
be notified by the Central Government. Once Act applies, it continues to apply even if
employment strength falls below 10. The act does not apply to Apprentices and Persons
who hold civil posts under central government or sate government and are governed by
any other act or by any rules providing for payment of gratuity Payment of Gratuity
payment of gratuity by an employer to an employee as defined under the act is
mandatory 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: Provided that 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: Provided further that in the case of death of the
employee, gratuity payable to him shall be paid to his nominee or, if no nomination has
been made, to his heirs, and where any such nominees or heirs is a minor, the share of
such minor, shall be deposited with the controlling authority who shall invest the same
for the benefit of such minor in such bank or other financial institution, as may be
prescribed, until such minor attains majority. Explanation: For the purposes of this
section, disablement means such disablement as incapacitates an employee for the
work which he was capable of performing before the accident or disease resulting in
such disablement. For every completed year of service or part thereof in excess of six
months, the employer shall pay gratuity to an employee at the rate of fifteen
days'wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on
the average of the total wages received by him for a period of three months
immediately preceding the termination of his employment, and, for this purpose, the
wages paid for any overtime work shall not be taken into account: Provided further that
in the case of an employee who is employed in a seasonal establishment and who is not
so employed throughout the year, the employer shall pay the gratuity at the rate of
seven days'wages for each season. Explanation: In the case of a monthly rated
employee, the fifteen days'wages shall be calculated by dividing the monthly rate of
wages last drawn by him by twenty-six and multiplying the quotient by fifteen. The
amount of gratuity payable to an employee shall not exceed three lakhs and fifty
thousand rupees. For the purpose of computing the gratuity payable to an employee
who is employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him during that
period, and his wages for the period subsequent to his disablement shall be taken to be
the wages as so reduced. Nothing in this section shall affect the right of an employee to
receive better terms of gratuity under any award or agreement or contract with the
employer. Notwithstanding anything contained in sub-section (1) (a), the gratuity of an
employee, whose services have been terminated for any act, willful omission or
negligence causing any damage or loss to, or destruction of, property belonging to the
employer, shall be forfeited to the extent of the damage or loss so caused (b). The
gratuity payable to an employee may be wholly or partially forfeited- if the services of
such employee have been terminated for his riotous or disorderly conduct or any other
act of violence on his part, or if the services of such employee have been terminated for
any act which constitutes an offence involving moral turpitude, provided that such
offence is committed by him in the course of his employment. Gratuity Explain the
procedure for determination and recovery of gratuity? Determination of gratuity: A
person who is eligible for payment of gratuity under this Act or any person authorised,
in writing to act on his behalf shall send a written application to the employer, within
such time and in such form, as may be prescribed, for payment of such gratuity. As
soon as gratuity becomes payable, the employer shall, whether an application referred
to in sub-section (1) has been made or not, determine the amount of gratuity and give
notice in writing to the person to whom the gratuity is payable and also to the
controlling authority specifying the amount of gratuity so determined. The employer
shall arrange to pay the amount of gratuity within thirty days from the date it becomes
payable to the person to whom the gratuity is payable. If the amount of gratuity
payable under sub-section (3) is not paid by the employer within the period specified in
sub-section (3), the employer shall pay, from the date on which the gratuity becomes
payable to the date on which it is paid, simple interest at such rate, not exceeding the
rate notified by the Central Government from time to time for repayment of long-term
deposits, as that Government may, by notification specify: Provided that no such
interest shall be payable if the delay in the payment is due to the fault of the employee
and the employer has obtained permission in writing from the controlling authority for
the delayed payment on this ground. It includes If there is any dispute to the amount of
gratuity payable to an employee under this Act or as to the admissibility of any claim
of, or in relation to, an employee for payment of gratuity, or as to the person entitled to
receive the gratuity, the employer shall deposit with the controlling authority such
amount as he admits to be payable by him as gratuity. Where there is a dispute with
regard to any matter or matters specified in clause a, the employer or employee or any
other person raising the dispute may make an application to the controlling authority
for deciding the dispute. The controlling authority shall, after due inquiry and after
giving the parties to the dispute a reasonable opportunity of being heard, determine the
matter or matters in dispute and if, as a result of such inquiry any amount is found to
be payable to the employee, the controlling authority shall direct the employer to pay
such amount or, as the case may be, such amount as reduced by the amount already
deposited by the employer. The controlling authority shall pay the amount deposited,
including the excess amount, if any, deposited by the employer, to the person entitled
thereto. As soon as may be after a deposit is made under clause (a), the controlling
authority shall pay the amount of the deposit- to the applicant where he is the
employee; or where the applicant is not the employee, to the 6 nominee or, as the case
may be, the guardian of such nominee or heir of the employee if the controlling
authority is satisfied that there is no dispute as to the right of the application to receive
the amount of gratuity. For the purpose of conducting an inquiry under sub-section 4,
the controlling authority shall have the same powers as are vested in a court, while
trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the
following matters, namely: enforcing the attendance of any person or examining him on
oath requiring the discovery and production of documents receiving evidence on
affidavits issuing commissions for the examination of witnesses. Recovery of gratuity 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 an
application made to it in this behalf by the aggrieved person, issue a certificate for that
amount to the Collector who shall recover the same, together with compound interest
thereon 1At such rate as the Central Government may, by notification, specify, from
the date of expiry of the prescribed time as arrears of land revenue and pay the same
to the person entitled thereto
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