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  • The payment of gratuity act shape

    The payment of gratuity act, 1972

    The Payment of Gratuity Act, 1972 deals with provisions for gratuity and imposes duty upon every establishment covered under this Act to provide benefits under this Act to all the eligible employees


    • This Act applies to every shops or establishments within the meaning of any law for the time being in force in a State, in which 10 or more persons 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 government under this Act notwithstanding the number of persons employed therein at any time after it has become applicable


    Every employee shall be eligible for the gratuity if he/she has completed 5 years of continuous servic

    If the person has worked for 5 years and 6 months, then he is deemed to have worked for 6 years but less than 6 months not to be considered

    The gratuity shall be payable to an employee on termination of his employment after he has rendered continuous service for not less than 5 years or,

    On his superannuation, or

    On his retirement, or where his death or total disablement the condition of 5 years complete service will not be applicable

    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


    • The employee who intends to nominate shall have completed one year or service
    • He shall make such nomination within thirty days of completion of one year service in Form F in duplicate and either personally deliver it to the employer or send it by registered post with acknowledgement due
    • The employer after verifying the employee’s details in nomination form shall record the nomination after acknowledging receipt thereof to the employee
    • An employee who has no family at the time of nomination can make nomination in favor of any person or persons but if he acquires a family thereafter, he has to make a fresh nomination in Form G within ninety days in duplicate in favor of one or more members of family of one or more members of his family
    • An employee who intends to modify his nomination, can do so, after giving written notice to the employer in Form H
    • A nomination or fresh nomination or modification of nomination shall be duly signed by the employee or shall bear his thumb impression (if illiterate) in the presence of two witnesses (Section 6 r/w Rule 6)

    Procedure for payment of gratuity

    • The employee shall make an application in Form I to the employer within 30 days from the date on which it becomes payable either by personal service on the employer or by the registered post with acknowledgement due (Section 7 r/w Rule
      His nominee shall make an application in Form J within 30 days of ot becoming payable. In case employee’s death, his legal heir can apply in Form K within one year to then employer (Section 7 r/w Rule 7)
    • The employer shall calculate the gratuity in the manner stated as prescribed under the Act, as soon as the gratuity becomes payable whether or not an application is made (Section 7)
    • The employer thereafter shall give the notice in Form L within 15 days of receipt of the application to the employee, or his nominee or his Legal heir under a copy the controlling authority. Such notice be served either by personal service against receipt or by registered post with acknowledgment due (Section 7 r/w Rule 8)
    • If the gratuity is not payable, the employer shall give the notice in Form M, to the employee or his nominee or his legal heir with the reason for the same under a copy to the controlling Authority
    • If the amount is payable, the employer shall arrange to pay the gratuity within 30 days from the date it becomes payable
    • In case of nominee or legal heir, the employer shall obtain the witness to establish the identity of them

    Mode of payment of gratuity

    • Gratuity amount shall be paid in cash or
    • Be sent by demand draft or by bank cheque to the employee, nominee or legal heir as the case may be or
    • Be sent by money order, if gratuity amount is less than Rupees 1000 or
    • In case of minor, the controlling authority shall invest the gratuity amount in SBI or its subsidiaries or nationalized bank (Rule 9)

    Responsibilities of employer

    • Employer shall submit details regarding its opening in Form A to the controlling authority, within 30 days of the Act becoming applicable to the establishment (Rule 3)
    • Employer shall submit details to the Controlling Authority in Form C, within 60 days before the intended closure of the establishment (Rule 3)
    • Employer shall intimate change in name, address, employer or nature of business to the Controlling Authority in Form B (Rule 3)
    • Employer has to register his establishment with the Controlling authority. (Section 4-A)
    • If the employer has their own gratuity fund then her shall have to obtain the insurance cover as laid down under Section 4-A of the Act
    • The amount of the gratuity shall be determined in terms of Section 7 of the Act
    • Employer shall issue the notice of the payment to employee within the stipulated period and pay the gratuity within the prescribed time as per Section 8 read with Rule 7
    • In case of the default by the employer, he is required to pay simple interest at the prescribed rate [Section7(3A)]
    • He is required to furnish such information or such records and registers as are called for by the Inspector for inspection
    • Employer shall display an abstract of the Act and Rules in Form U in English or such other language which can be understood by the employees (Rule 20)
    • No deduction shall be made in the gratuity which is not permissible under the Act [Section 4(6)]


    Contravention Penalty
    For not obtaining insurance for the employer’s liability for Gratuity Fine upto Rupees 10000 and Rupees 2000 for each day of default for continuing the offence
    For making false statement or false representation to avoid payment of gratuity Six months imprisonment or with fine upto Rupees 10000 or both
    For violating or non-compliance of any provision of the Act Imprisonment minimum-3 months – maximum one year or fine – minimum Rupees 10000 or – maximum Rupees 20000
    For non-payment of gratuity Sentence minimum – 6 months maximum – two years