Scope of
coverage
o Every factory (as defined in Factories Act), mine, oilfield,
plantation, port and railway
o Every shop or establishment to which Shops & Establishment
Act of a State applies in which 10 or more persons are employed at any time
during the year end.
o Any establishment employing 10 or more persons as may be notified
by the Central Government.
o Once Act applies, it continues to apply even if employment
strength falls below 10.
The act
does not apply to:
a)
Apprentices and
b) Persons who hold civil
posts under central government or sate government and are governed by any other
act or by any rules providing for payment of gratuity
PAYMENT
OF GRATUITY
Payment
of gratuity by an employer to an employee as defined under the act is
mandatory:
1)
Gratuity shall be payable
to an employee on the termination of his employment after he has rendered
continuous service for not less than five years, -
(a) On his superannuation, or
(b) On his retirement or
resignation, or
(c) On his death or
disablement due to accident or disease : Provided that the completion of
continuous service of five years shall not be necessary where the termination
of the employment of any employee is due to death or disablement : Provided
further that 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 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.
Explanation: For the purposes of
this section, disablement means such disablement as incapacitates an employee
for the work which he was capable of performing before the accident or disease
resulting in such disablement.
2)
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 : Provided that in
the case of a piece-rated employee, daily wages shall be computed on the
average of the total wages received by him for a period of three months
immediately preceding the termination of his employment, and, for this purpose,
the wages paid for any overtime work shall not be taken into account : Provided
further that in the case of an employee who is employed in a seasonal establishment
and who is not so employed throughout the year, the employer shall pay
the gratuity at the rate of seven days' wages for each season.
Explanation: In the case of a monthly rated
employee, the fifteen days' wages shall be calculated by dividing the monthly
rate of wages last drawn by him by twenty-six and multiplying the quotient by
fifteen.
3)
The amount of gratuity
payable to an employee shall not exceed three lakhs and fifty thousand rupees.
4)
For the purpose of
computing the gratuity payable to an employee who is employed, after
his disablement, on reduced wages, his wages for the period preceding his
disablement shall be taken to be the wages received by him during that period,
and his wages for the period subsequent to his disablement shall be taken to be
the wages as so reduced.
5)
Nothing in this section
shall affect the right of an employee to receive better terms
of gratuity under any award or agreement or contract with the
employer.
6)
Notwithstanding anything
contained in sub-section (1), -
a)
The gratuity of
an employee, whose 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, shall be forfeited to the extent of the damage or loss
so caused.
b)
The gratuity payable
to an employee may be wholly or partially forfeited
i. If the services of such employee have been terminated for his
riotous or disorderly conduct or any other act of violence on his part,
or
ii. If the services of such employee have been terminated for any act
which constitutes an offence involving moral turpitude, provided that such
offence is committed by him in the course of his employment.
