The Gratuity Act 1972
An Act which came into force on 16 September 1972 is a type of retirement benefit from Employers/Establishments to their Employees in a lump sum amount as a token of gratitude or honour for his/her services rendered towards the Employers/Establishments.
Mandatory applicability Payment of Gratuity Act On :
1 . Every factory,
- Every shops and establishments within the meaning of any law for the time being in force in relating to shops and establishments in which 10 or more persons are employed on any day of the preceding 12 months.
- And other establishment or class of establishment in which 10 or more employees are employed.
Eligibility for the Gratuity :
- The employee becomes entitled to gratuity after his/her completion of 5 years of service with one employer.
- In case of death or disablement, the requirement of minimum qualifying period has been completely
- Suspension from service for any period/detachment on closer of unit or otherwise, does not affect the continuity of service.
Rules for Payment of Gratuity :
- An eligible employee must apply for gratuity payment within 30 days from the payable date. Additionally, in case of retirement or superannuation, apply before one month to receive such payments.
- An employer cannot reject an application if it is applied after 30 days for a valid reason.
- Employers must fill in the payment date and amount payable within 15 days of receiving applications. An employer must pay gratuity amounts within 30 days of receiving applications. In case employers reject applications, they must specify the reason.
- An employer may demand evidence or a witness if a nominee or a legal heir claims gratuity. He/she will accept the claim from the date such evidence is produced before him/her.
Nomination in Gratuity :
An employee can nominate another person to receive gratuity on his/her behalf, under circumstances of the former’s death, within 30 days of completing 1 year of service with an organisation.
Mandatory provisions for nomination for receiving Gratuity–
- For employees with a family – Employees having a family can nominate one or more of its members. Nominations made to any other person will be void.
- For employees without a family – Employees will be able to nominate a Third person if they do not have a family. However, such nomination will become void once they have a family.
If the nominated person expires, the employee can nominate another individual as per his will in such cases.
Forfeiture of Gratuity :
The Section 4 of the Gratuity Act permits an employer to forfeit an employee from the gratuity payment for the following circumstances:
- If an employee is terminated based on negligence or wilful omission causing damage to an employer’s property, he/she can forfeit the gratuity amount. The sum is forfeited based on the extent of the damage.
- An employer is eligible to deduct the entire payable gratuity amount in case an employee is terminated due to misconduct, immoral behaviour, or other violent acts.
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