The Payment of Gratuity Act, 1972 – Brief Notes

Gratuity is the lump sum amount given to an employee as social security who has worked in an establishment for a minimum of five years, in case of retirement or superannuation. 

As per the Payment of Gratuity (Amendment) Act, 2010 the ceiling of gratuity was increased from Rs.3.5 Lakhs to Rs.10 lacs and according to Payment of Gratuity (Amendment) Act, 2018 which was brought into force on 29th March 2018 the ceiling limit is Rs.20 Lacs as notified by the central Government. This is due to the implementation of the 7th Central Pay Commission. However, in the amended Act, the ceiling amount can be notified by the Central Government from time to time so that the Act does not need constant amendment. 

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Also, the calculation of Gratuity in case of maternity leave was initially 12 weeks but now the period will be notified by the government. It is applicable to establishments which employ 10 or more people.

  • An employee is also entitled to gratuity in case of death or disablement caused by disease or injury. 
  • Gratuity is to be paid to the employee or to the nominee of the employee in case of death. If no nominee has been declared and a minor is to be assigned nomination, then the authority will deposit the money in the bank for the minor. 
  • An employee loses the right to claim gratuity in case his employment is terminated due to his omission or negligence that led to loss or damage but the gratuity is forfeited only to the extent of provable damage. Also in case of termination is due to disorderly or violent conduct and offence committed during the course of employment, the gratuity is not payable.
  • The employee has to make a claim for gratuity by sending a written application to the employer within 30 days of the gratuity becoming payable.
  • The employer has to pay the gratuity within 30 days of it becoming payable and if he fails to do so, the gratuity has to be paid along with simple interest at the rate of 10% p.a.

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