The Objective:
The provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oil fields, plantations, ports, railway companies, shops or other establishments.

Coverage:
Every factory, mine oil field, plantation, port or railway company and every shop or establishment within the meaning of any law in which ten or more persons are employed or were employed on any day of the preceding twelve months is covered by this Act.

Exemption:
The appropriate Government has powers to grant exemption to any establishment, factory etc. wherein the employees received gratuity or pensionary benefits not less favourable than under this Act.

Important definitions:
"Continuous Service" means uninterrupted service and includes services which is interrupted by sickness, accident leave, lay off, or cessation of work not due to any fault of the employee concerned, whether such interrupted or uninterrupted services was rendered before or after the commencement of this Act.

N.B. Period of service prior to 16-09-1972 on which ate the Act came into forces is also considered for payment of Gratuity.

An employee who is not in uninterrupted service for one year, is deemed to be in continous service if he has been actually employed by an employer during the twelve months immediately preceding the year for not less than 240 days. In case of employee employed below the ground in a mine, the required number of days is 190.

"Controlling Authority" means an authority appointed by the appropriate Government for the administration of this Act.

"Employee" means any person (other than an apprentice) employed on wages, not exceeding one thousand and six hundred rupees per month in any establishment, factory or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, and includes any such person who is employed in a managerial, administrative capacity. However one who holds a civil post under Government is excluded. In the case of an employee who, having been employed for a period of not less than five years on wages not exceeding one thousand and six hundred rupee per mensem, is employed at any time thereafter on wages exceeding one thousand and six hundred rupees per mensem, gratuity, in respect of the period during which such employee was employed on wages not exceeding one thousand and six hundred per month, shall be determined on the basis of the wages received by him during that perIod.

"Retirement" means termination of the services of an employee otherwise than on superannuation.

"Superannuation" means the attainment by the employee the age on which he shall vacate the employment by conditions of service and in any other case, the attainment by the employee of the age of fifty-eight years.

"Wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

Payment :
Gratuity is payable to an employee on his termination of service after continuous service for not less than five years, on wages not exceeding Rupees One Thousand  & Six Hundred on  superannuation, retirement, or resignation or death or disablement due to accident or disease. Completion of continuous service of five years is not necessary where the termination is due to death or disablement.
N .B. Employee not resigning but being treated as having voluntarily abondoned the services of his own accord is also entitled to payment.

Rate of Payment :
For every completed year of service or part thereof in excess of six months, the payment of gratuity is at the rate of fifteen days wages based on the rate of wages last drawn by the employee concerned.

N.B. Wages drawn for the last month of service to be divided by 26 and then that amount is to be multiplied by 15.

 In case of piece-rated employee, wages to be computed on the average of the total wages for a period of three months immediately preceding. For an employee employed in a seasonal establisnment, the payment is at the rate of seven days wages for each season.

The amount of gratuity payable shall not  twenty months' wages.

N. B. Twenty months means 600 days.
When an employee is employed after disablement on reduced wages, his wages for the period prceding his disablement shall be taken to be the wages received during that period and wages for the period subsequent to disablement shall be the reduced wages.

Better Terms :
Right of an employee to receive better terms of gratuity under any award or agreement or contract is not affected by this Act.

Forfeiture:
When services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of property belonging to the employer, gratuity amount is forfeited to the extent of the damage or loss so caused Gratuity is forfeited fully if the services are terminated for riotous or disorderly conduct or any other act of violence or for any act which constitutes an offence involving moral turpitude provided that such offence is committed in the course of employment.

Nomination:
An employee can in the prescribed manner/form distribute the amount payable to him amongst more than one nominee, nomination being in favour of member/s of the family.

Determination of the amount:
An employee who is eligible to receive the gratuity amount or his authorised person shall send his written application to employer within specified time and prescribed manner. As soon as gratuity becomes payable, the employer shall determine the amount and notify the person to whom gratuity is payable as also the controlling Authority.

Dispute:
In case of a dispute, the amount admitted by the employer shall be deposited with the Controlling Authority which will determine the amount payable after hearing the parties to the dispute.

Recovery of Gratuity:
On the failure of employer to make the payment the Controlling Authority shall issue a certificate to collector who shall recover the amount together with compound interest @ of 9% p.a as arears of land revenue pay the amount to the person concerned.

Protection of Gratuity:
No Gratuity shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court. 

THE PAYMENT OF GRATUITY ACT, 1972  (detailed)