Title: Payment of Gratuity Act, 1972 (applied all over India except J&K)
Description: Gratuity is the reward in the form of money (BASIC+DA salary maximum up to Rs. 10 lacs) for an employer to his employee on his separation for his continuous past services not less than 5 years (not even 4 years 11 months will work) [Retirement, Superannuation, Resignation, Death and Disablement (Even if not completed 5 years). Can forfeit in case of termination].
Applicability: Establishment or company employing 10 or more employees (once covered under act even if the number falls below 10 the applicability will continue).
Formula: Gratuity amount = Last drawn salary X 15/26 X completed years of service;
Where, Last drawn salary = Average 3 months wages; does not include overtime wages,
Normally 15 days wages in a month of 26 days but for seasonal employment 7 days wages in a month of 26 days are calculated,
& completed years of service = After 5 years, if worked more than 6 months but less than a year, then it is calculated as another one year but if worked less than 6 months, then not considered as another year.
Last amendment: Max. Amount of gratuity payable is Rs. 10 lacs instead of Rs. 3.5 lacs. The definition of employee was ‘only those performing manual, semiskilled skilled, unskilled, supervisory technical or clerical or managerial or administrative work’. Now, the definition has been broad based as to include any person, employed to do any kind of work for eg. includes a teacher as an employee under the Act.
Authority: Appellate Authority - Deputy Labour Commissioners of Labour Department & Controlling Authority – All Labour Officers and Assistant Labour Commissioners of Labour Department.
Penalty: Up to 6 months imprisonment for a term or up to Rs. 10,000 fine or both to person making false claim; 3-12 months imprisonment or Rs. 10,000 – Rs. 20,000 fine or both to employer for not fulfilling the duty; 6-24 months imprisonment or Rs. 10,000 fine or both to employer in case of non-payment.
Process Flow Chart:
Employee or nominee submits FORM I to employee (within 30 days or before 30 days when it becomes payable); legal heir can submit within 1 year;
Employer release notice FORM L (within 15 days of FORM I submission) to employee and Controlling Authority even if application is not received from employee;
Employer release payment (within 30 days of notice reception) else pay with 10% simple interest.
NOTES: No wage ceiling, Uninterrupted service (other than maternity leave, 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; 240/190-mines days per year), tax exemption – Rs. 10 lacs once in a lifetime, cannot be stated as salary.
From India, Gurgaon
22Description: Gratuity is the reward in the form of money (BASIC+DA salary maximum up to Rs. 10 lacs) for an employer to his employee on his separation for his continuous past services not less than 5 years (not even 4 years 11 months will work) [Retirement, Superannuation, Resignation, Death and Disablement (Even if not completed 5 years). Can forfeit in case of termination].
Applicability: Establishment or company employing 10 or more employees (once covered under act even if the number falls below 10 the applicability will continue).
Formula: Gratuity amount = Last drawn salary X 15/26 X completed years of service;
Where, Last drawn salary = Average 3 months wages; does not include overtime wages,
Normally 15 days wages in a month of 26 days but for seasonal employment 7 days wages in a month of 26 days are calculated,
& completed years of service = After 5 years, if worked more than 6 months but less than a year, then it is calculated as another one year but if worked less than 6 months, then not considered as another year.
Last amendment: Max. Amount of gratuity payable is Rs. 10 lacs instead of Rs. 3.5 lacs. The definition of employee was ‘only those performing manual, semiskilled skilled, unskilled, supervisory technical or clerical or managerial or administrative work’. Now, the definition has been broad based as to include any person, employed to do any kind of work for eg. includes a teacher as an employee under the Act.
Authority: Appellate Authority - Deputy Labour Commissioners of Labour Department & Controlling Authority – All Labour Officers and Assistant Labour Commissioners of Labour Department.
Penalty: Up to 6 months imprisonment for a term or up to Rs. 10,000 fine or both to person making false claim; 3-12 months imprisonment or Rs. 10,000 – Rs. 20,000 fine or both to employer for not fulfilling the duty; 6-24 months imprisonment or Rs. 10,000 fine or both to employer in case of non-payment.
Process Flow Chart:
Employee or nominee submits FORM I to employee (within 30 days or before 30 days when it becomes payable); legal heir can submit within 1 year;
Employer release notice FORM L (within 15 days of FORM I submission) to employee and Controlling Authority even if application is not received from employee;
Employer release payment (within 30 days of notice reception) else pay with 10% simple interest.
NOTES: No wage ceiling, Uninterrupted service (other than maternity leave, 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; 240/190-mines days per year), tax exemption – Rs. 10 lacs once in a lifetime, cannot be stated as salary.
From India, Gurgaon
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Gratuity Act-Teachers-Ma dhya Pradesh.docx
Payment of Gratuity Act, 1972 & The Rules.ppt