Tuesday, August 20, 2019

Gratuity: Rules, Applicability, Payment, Penalities




Gratuity is a statutory benefit paid to the employees who have rendered continuous service for at least five years. It is a lump sum amount paid to an employee based on the duration of his total service. The benefit gratuity is payable to an employee on cessation of employment (either by resignation, death, retirement or termination, etc) by taking the last drawn salary as the basis for the calculation. Gratuity is an important form of social security and is in the form of a gratitude provided by the employer to the employees in monetary terms for the services rendered by them to the organization. It is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving his job. Gratuity payment liability of the employer tends to increase with an increase in the salary and tenure of employment. 

Payment of Gratuity Act, 1972 
21ST August, Came into force w.e.f. 16th September 1972.
Applicability of The Act
As per the Gratuity Act, the scheme for the payment of gratuity is available to:
¨      Firstly he should be employed in an establishment to which Act applied according to sec1(3)
·         Every factory, mine, oilfield, plantation, port, railway company
·         Every establishment within the meaning of any law, force in relation to shops and establishments in a State, in which 10 or more persons are employed, or were employed, on any day of the preceding  12 months;
·          as per the notification of Central Government in this behalf.
·         Not apply in J&K pants and mines.
¨      Secondly he should be employee under Section 2(e)
Employee means any person (other than an apprentice)  employed on wages in an establishment to do any skilled, semiskilled,  unskilled, manual or  supervisory, technical, or clerical work.

When Is Gratuity Payable
      According to section 4(1) of the Payment of Gratuity Act, 1972 gratuity is paid after termination of employee after rendering continuous service not less then 5 years:
                (a) on his superannuation,
                (b) on his retirement or resignation or,
                (c) on his death or disablement due to accident or disease.

Who should get if employee dies
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 (i.e. government officer) 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.

Amount Of Gratuity Payable
      Basic pay is divided by 26. The amount so obtained is multiplied by 15 to compute the amount of gratuity  per year.
      Maximum Gratuity Payable under Act was Rs. 10,00,000/-
      Now maximum Gratuity Payable under Act was Rs.20,00,000/- ( w.e.f. 29 March 2018)


Time Limit For Payment Of Gratuity
      The employer shall arrange to pay the amount of gratuity within 30 days from the date it becomes payable
      If not paid within the period stipulated above employer is liable to pay interest for the delayed payment
      Interest is not payable if the delay was caused 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
      If there is any dispute as to the amount payable or the persons eligible to receive it the employer shall deposit amount as per his calculation with the controlling authority.    

Appeal Against The Order Of Controlling Authority
*      Appeal if any shall be made within 60 days from the date of the order
*      Appeal by employer will not be admitted unless the disputed amount is deposited
*      Appellate authority, after giving the parties to the appeal a reasonable opportunity of being heard, Confirm, modify or reverse the decision of the controlling authority 

Penalities
      Non Payment Of Gratuity
    Imprisoment: 6months -2 years
    Fine : 10,000 to 20,000rs or both
       Fail In Compulsory Insurance
     Fine : 10,000rs
     For Continuous Offence : 1000rs/Day


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